Crude oil prices have fallen to their lowest levels in four months, effectively returning to pre-conflict prices. Brent crude futures dipped to $73.97 per barrel, a 4% decrease, while US West Texas Intermediate (WTI) traded at $70.36 per barrel, down 3.89%. This decline is attributed to improved shipping activity through the Strait of Hormuz and an interim agreement between the US and Iran.
Shipping traffic through the Strait of Hormuz has significantly increased, with 31 verified crossings of various vessel types on Tuesday. This surge follows progress in negotiations between the US and Iran, aiming for a durable peace and full reopening of the vital waterway, which normally handles over 20% of global crude and liquefied natural gas supply. US Vice President JD Vance noted "good progress" in the initial talks.
Under a 60-day sanctions waiver granted by Washington after peace talks, Iran is able to resume oil exports. Iranian crude exports, which had plummeted to 329,000 barrels per day in May (down 85% from February's 2.2 million bpd), are now expected to surge, further contributing to downward pressure on oil prices. Three stranded tankers carrying 5 million barrels of crude have already begun exiting the strait. Energy Secretary Chris Wright reported that 72 ships, carrying 20 million barrels of oil, exited the Strait of Hormuz in the last 24 hours.
Oman has also established a temporary, toll-free shipping transit corridor in the Strait of Hormuz and designated two additional routes to facilitate safe passage. The United Arab Emirates, a major oil producer, has seen its exports recover to nearly 85% of pre-war levels. These developments, along with rising fuel stockpiles and a forecast cut by J.P. Morgan, have eased supply concerns despite tight US inventories. Analysts believe the market is pricing in the broader scenario of Iranian oil re-entering the global market and the normalization of the Strait of Hormuz.
