Oil prices experienced a sharp decline following statements from US Treasury Secretary Scott Bessent, who indicated a deal to reopen the Strait of Hormuz with Iran could be imminent. Brent crude, the international benchmark, fell by 5.3% on Tuesday to below $79.00 per barrel, while West Texas Intermediate futures dropped by 5.7% to $75.64. This significant downturn was largely driven by optimism that increased oil shipments would soon flow through the vital waterway, which had been restricted due to recent conflicts.
The potential agreement, discussed in negotiations between Iran and Oman, reportedly involves a two-route system for vessels: entering the Persian Gulf through an Iranian-controlled route and exiting via an Omani-controlled route. While some US officials, including Secretary of State Marco Rubio, confirmed progress in these talks, Iran's foreign ministry denied direct negotiations with Washington, stating talks were only with Oman. Despite this, President Trump reiterated that an agreement was close and could happen "today or tomorrow," with the reopening of the strait being the first phase, followed by denuclearization of Iran.
The market's reaction was primarily speculative, with traders pricing in the geopolitical premium associated with the Strait of Hormuz standoff. The drop in oil prices reflects the expectation of a deal that has not yet been formally signed. Analysts note that this price movement was driven by diplomacy rather than fundamental changes, such as the American Petroleum Institute's estimate of a 2.69 million barrel rise in US crude inventories for the week ending July 30, which was contrary to expectations for a draw. The risk remains that if talks stall, this geopolitical premium could quickly return to oil prices.
