Oil prices experienced a decline as discussions between US and Iranian negotiators surfaced regarding a potential phased agreement to reopen the Strait of Hormuz. Global benchmark Brent crude dropped towards $105 a barrel, while West Texas Intermediate fell below $93. This comes after Brent had risen more than 7% in the preceding two days. The two nations, despite recent failures in similar agreements, were reportedly seeking a breakthrough during the United Nations General Assembly. Iranian Foreign Minister Abbas Araghchi indicated that Tehran had submitted a new seven-day proposal to Washington with conditions for reopening Hormuz.
Crude markets have seen significant volatility, influenced by the nearly seven-month conflict between Washington and Tehran. Mixed signals on the war's outlook, increased Middle East oil flows, and speculation about a potential US ban on diesel exports have all contributed to price fluctuations. For the year, Brent remains more than 70% higher, exacerbating inflationary pressures. Analysts suggest that Brent prices are likely to hover between $100 and $110 unless a material change occurs. A credible, phased deal could push prices below $100 quickly, while further disruptions could send them to $120.
The Strait of Hormuz, connecting the Persian Gulf to global markets, has been central to the conflict, with Iran asserting sovereign control over the waterway that historically carried about a fifth of daily global oil and natural gas supplies. The US, maintaining a blockade of Iranian ports, insists on the route's unchanged status. A White House official stated that President Donald Trump was open to talks but felt no need to negotiate given the US's strong position due to sanctions and the blockade, which began with a joint US-Israel attack in late February aimed at ending Tehran's nuclear program. Carolyn Kissane of NYU noted the market's desire for "actual real action" after months of volatile reactions to headlines.
Physical markets are also showing signs of tightness. Traders on Thursday paid record premiums for prompt barrels at the main US storage hub in Cushing, Oklahoma. In Europe, Dated Brent, a key physical benchmark, has been trading at a wide premium compared to futures contracts.
