By Robert Harvey
LONDON, Aug 18 (Reuters) - Oil prices traded slightly higher for a third session on Tuesday as prospects receded for a deal to end the Middle East war, with Iran saying it would adopt a more offensive stance and the U.S. ruling out extending a ceasefire deal, heightening worries about prolonged energy supply disruptions.
Brent crude futures climbed 7 cents, or 0.08%, to $90.94 a barrel by 1031 GMT. U.S. West Texas Intermediate crude futures were up 53 cents, or 0.63%, at $85.03 a barrel.
Brent and WTI futures traded at their highest since July 30 and July 31, respectively, earlier in the session.
"Sentiment remained supported by US President Donald Trump's decision not to extend the US-Iran peace agreement and continued security concerns in the Strait of Hormuz," ING analysts wrote in a note.
Outward progress on peace talks and resumption of oil tanker traffic through the strategic Strait of Hormuz has halted, threatening to extend the conflict the United States and Israel launched with attacks on Iran on February 28.
Iran will keep the Strait of Hormuz closed until the U.S. meets the conditions of the interim deal signed in June, top Iranian negotiator Mohammad Baqer Qalibaf said in comments published by state media on Tuesday. Trump had previously labelled that deal "over".
Qalibaf's comments came after a senior Iranian official told Reuters on Monday that Iran will shift to a "fully offensive" military posture as efforts have stalled towards a permanent end to the war.
"The lack of any kind of deal will have an impact on oil price expectations further out in 4Q and even in 2027," said DBS Bank's head of energy research Suvro Sarkar.
Some oil is escaping Hormuz however, though crossings are at single digits. Saudi Aramco has resumed oil loadings from inside the Strait of Hormuz, and is offering cargoes for loading via ship-to-ship transfers off Fujairah in the UAE.
"It is probably in Iran's power to fully halt the flow of oil out of the Strait of Hormuz whenever they find it suitable," said SEB analyst Bjarne Schieldrop.
Iran has separately been negotiating with Oman an agreement on managing the Strait of Hormuz and says they are close to a deal. But Trump responded to those talks with a threat to bomb Oman, a longstanding U.S. security partner.
Elsewhere in the Middle East, Yemen's Houthis launched missiles in an attack on vessels they described as a Saudi military ship and four escorts in the Red Sea, their military spokesperson, Yahya Saree, said on the Telegram messaging app.
(Reporting by Robert Harvey in London, Ishaan Arora in Bengaluru and Trixie Yap in Singapore; Editing by Saad Sayeed, Kirsten Donovan)
