The modest bounce suggests the market is treating Monday's selloff as an overreaction to Trump's pause on strikes rather than confirmation of a genuine resolution, particularly given Iran's denial that any talks are under way. The dispute over interpretation of the June memorandum of understanding, with Washington and Tehran reading the Hormuz provisions differently, points to a source of friction that could resurface at any point and reverse the recent price relief. Barclays' data showing crude and product flows through Hormuz actually rose week on week suggests the physical market has not yet seen the disruption that headline risk implies, but the fresh UKMTO incident near Al Khasab and the continued rerouting of Saudi tankers around Africa indicate shippers are not taking any chances. With both Hormuz and Bab al-Mandeb still contested, the market looks likely to retain a geopolitical risk premium that prevents prices from fully unwinding recent gains, even as the immediate threat of renewed US strikes has receded.---Oil recovered modestly on Tuesday but the rebound looks fragile, with Iran denying talks are under way and a new incident near Hormuz keeping the market's geopolitical risk premium intact.Summary:Brent crude rose around 0.7% on Tuesday, recovering slightly after dropping more than 7% on Monday to a three-week low.WTI also rose about 0.7% to near $81, after falling over 5% in the previous session to its lowest level in nearly a week.Monday's selloff followed Trump's statement that he was holding off on new attacks on Iran pending talks to end the conflict and resolve control of the Strait of Hormuz, though Iran's Foreign Ministry spokesman denied any negotiations were under way or meetings scheduled.The Strait of Hormuz remains a central point of dispute, with Washington saying June's memorandum of understanding required Iran to open the waterway, while Tehran says the text preserved its authority over it.Barclays data showed crude and refined product net exports through the Strait averaged 4.2 million barrels per day in the week to July 31, up from 3.2 million bpd the previous week.Shipping remains disrupted more broadly: six Saudi-flagged supertankers rerouted around southern Africa, two Saudi oil tankers crossed the Bab el-Mandeb Strait, and Hormuz traffic slowed following reports of vessel attacks.UKMTO reported a fresh incident on Tuesday, 20 nautical miles northeast of Oman's Al Khasab, after a cargo vessel broadcast that it had been hit by an unknown projectile.Oil prices edged higher on Tuesday, recovering a small part of the previous session's steep losses, as the market weighed conflicting signals over whether a diplomatic resolution to the US-Iran conflict is genuinely within reach.Front-month Brent futures rose around 0.7%, clawing back a fraction of Monday's more than 7% slide to a three-week low. US West Texas Intermediate crude gained a similar 0.7%, trading near $81 after tumbling more than 5% in the prior session to its lowest level in nearly a week. The initial drop came after President Trump said on Sunday he was holding off on new strikes against Iran pending talks aimed at ending the conflict and settling the dispute over control of the Strait of Hormuz, a waterway that before the conflict carried daily energy exports equal to roughly a fifth of total global consumption.That optimism proved short-lived. On Monday, Iran's Foreign Ministry spokesman Esmail Baghaei rejected Trump's characterisation, saying no negotiations with the United States were taking place and no meetings were scheduled. Analysts noted that while Trump's pause on strikes and talk of renewed negotiations had taken some of the sting out of prices, the move lower remained fragile, with oil capable of rebounding sharply again should missiles resume or tankers near Hormuz come under fire once more.Much of the disagreement centres on how to interpret a memorandum of understanding reached in June. Washington maintains the agreement required Iran to open the Strait of Hormuz to shipping, while Tehran argues the text explicitly preserved its authority over the waterway. Despite the dispute, physical flows through the strait have held up according to Barclays, with the bank estimating that crude oil and refined product net exports through Hormuz averaged 4.2 million barrels a day in the week ending July 31, up from 3.2 million bpd the week before.Shipping patterns elsewhere continue to reflect elevated caution. Six Saudi-flagged supertankers changed course in the Gulf of Aden in recent days and are now heading around southern Africa, while two tankers carrying Saudi oil crossed the Bab el-Mandeb Strait, according to shipping data. Traffic through the Strait of Hormuz between Iran and Oman also slowed following reports of vessel attacks. Underlining that risk, the UK Maritime Trade Operations body said on Tuesday it had received a report of an incident 20 nautical miles northeast of Oman's Al Khasab, after a cargo vessel broadcast that it had been hit by an unknown projectile.Analysts said the combination of disruption in the Red Sea and the standoff over Hormuz has created a dual-chokepoint risk that continues to underpin prices even as outright fighting has not fully halted energy flows. The fighting between Saudi Arabia and the Houthis, while not stopping shipments entirely, has forced longer voyage times, higher insurance costs, and periodic diversions, a dynamic analysts say keeps the market from fully unwinding its geopolitical risk premium as long as both chokepoints remain contested. This article was written by Eamonn Sheridan at investinglive.com.