Oil prices experienced a sharp decline on Tuesday, with Brent crude futures falling by $4.41 or 5.3% to settle at $79.36 per barrel, and West Texas Intermediate crude dropping by $4.57 or 5.7% to $75.77 per barrel. Both benchmarks reached their lowest levels since July 13. This plunge was driven by increased optimism surrounding a potential deal between the US and Iran to reopen the Strait of Hormuz.
US Treasury Secretary Scott Bessent indicated that a deal could be reached "today or tomorrow" to open the Strait of Hormuz, echoing earlier statements by President Donald Trump. Secretary of State Marco Rubio also confirmed that the US was involved in negotiations between Oman and Iran to increase traffic through the vital waterway. Qatar, acting as a mediator, confirmed ongoing diplomatic efforts, though direct US-Iran talks were denied by Iran's foreign ministry.
Despite the positive diplomatic signals, ANZ analysts noted that transits through the Strait of Hormuz had only marginally improved from previously depressed levels, and Iranian attacks on vessels continued to constrain exports. Goldman Sachs anticipates Brent crude to trade between $80 and $90 per barrel until a new US-Iran agreement is confirmed or a significant escalation in attacks occurs. The market also remained sensitive to other geopolitical developments and awaited SpaceX earnings after the Wall Street close, as well as US jobs data later in the week.
Following Bessent's remarks, Brent crude later climbed 0.43% on Wednesday to $79.7 per barrel after sliding 5.3% the day before, while West Texas Intermediate futures inched up 0.21% to trade at $75.95, after falling 5.7% the day before. The Saudi Aramco CEO stated that over $2.6 billion barrels of oil had been lost from global supply since the Iran conflict began in February.
