Oil prices extended their drop, with Brent crude falling below $75 for the first time since the Iran war began in late February. This decline reflects growing confidence among shipowners as more tankers openly cross the Strait of Hormuz, indicated by vessels transiting with their satellite signals switched on. The International Maritime Organization has also received safety guarantees, allowing hundreds of ships to exit the Persian Gulf. The global benchmark shed as much as 3.1%, reaching its lowest point since February 27. Overall, oil prices are down approximately 40% from their peak during the conflict.
The improving traffic through Hormuz is a direct result of progress in U.S.-Iran peace talks, with both Washington and Tehran signaling early advancements. Although negotiations are expected to be protracted, this has significantly reduced the "fear premium" that was built into crude prices during the conflict. The International Energy Agency estimates that the United Arab Emirates is now exporting oil at nearly 85% of pre-war levels, and the UAE has sold around 60 million barrels from inside the Persian Gulf in recent weeks.
The swift return of supply routes, aided by pipelines, storage hubs, and alternative shipping corridors, has contributed to the bearish sentiment. Additionally, a fresh 60-day U.S. waiver allowing transactions involving Iranian crude and refined products has reinforced the prospect of more barrels reaching Asian markets. While the immediate focus is on clearing a backlog of Gulf crude, analysts note that the underlying depletion of global inventories, drawn down at an unprecedented pace during the disruption, will eventually need rebuilding. However, for now, crude remains exposed to further weakness as the physical market clears stranded barrels.
In a related development, U.S. President Donald Trump ordered the Department of Justice to investigate why gasoline prices have not fallen faster. The national average retail price has declined 14% since late May and is now below $4 a gallon, though it remains above the five-year seasonal average. U.S. retail diesel prices have also dropped below $5 a gallon for the first time since mid-March. Despite the overall easing of prices, there are signs of tightness in some markets, with crude inventories at the key storage hub of Cushing, Oklahoma, reportedly falling by another 1 million barrels last week, potentially below the 20-million-barrel minimum operating level.
