Oil prices are reacting to the ongoing US-Iran peace talks in Switzerland, with volatile movements. Brent crude gained over 2%, and the dollar firmed against other currencies. However, market sentiment suggests that while talks have begun, a "peace premium" is not yet guaranteed, and the path to a deal may face significant hurdles, including ongoing geopolitical tensions and President Trump's warnings about potential strikes if Hezbollah continues attacking Israel.
Despite positive reports from both Iranian and US officials about "major progress," including Iran's Foreign Minister Abbas Araghchi citing waivers for oil and petrochemical exports, the lifting of a US naval blockade, and the release of frozen assets, West Texas Intermediate (WTI) futures traded 1.2% lower near $75.50. This indicates that the market remains cautious. A joint statement from Pakistan and Qatar, mediators in the talks, also confirmed a roadmap towards a final deal within 60 days.
Signs of de-escalation include Iran boosting crude oil shipments through the Strait of Hormuz to the highest levels since the war began, with three US-sanctioned supertankers carrying approximately 6 million barrels entering the chokepoint. Additionally, five oil supertankers with a combined capacity of about 8 million barrels were observed in the Strait of Hormuz over the weekend. Iran projects that approximately 80 million barrels of crude could hit the market once the Strait fully reopens, alongside resumed exports previously blocked by the US naval blockade. The United Arab Emirates, Kuwait, and Iraq have also increased oil offerings, with Iraq planning to restore crude production to between 4.2 million and 4.3 million barrels per day.
