Oil prices plunge on hopes ships could soon return to Strait of Hormuz

International

A GLIMMER of hope over the Strait of Hormuz sent oil prices tumbling on Tuesday, after senior US officials said negotiations with Iran had moved closer to a possible agreement.

Brent crude, the global benchmark, fell almost 5% to below $80 a barrel, while US West Texas Intermediate dropped more than 5% to about $76. Both contracts reached their lowest levels since 13 July.

The market move followed comments from US Secretary of State Marco Rubio and Treasury Secretary Scott Bessent indicating that discussions aimed at restoring shipping through the strategically important waterway had advanced.

Rubio said progress had been made in talks involving Iran and Oman over allowing more vessels to pass through the strait, although he stressed that no final agreement had yet been reached.

“There’s been progress made in those talks, but not finality yet. We’re hoping that will happen very shortly,” he told reporters at the State Department, as quoted by the BBC.

Bessent separately said an agreement could come as soon as Tuesday or Wednesday, raising the possibility of reopening the strait and moving towards a more normal position in the conflict. He also indicated that such an arrangement would allow freedom of movement for commercial vessels, including on the question of whether Iran could charge ships to pass.

No details have been released by the US government on what a potential agreement would entail.

Iran has said it is not negotiating with the US and has no plans to do so, instead holding discussions with Oman, which has acted as a mediator.

An Iranian foreign ministry spokesman said talks with Oman over a new mechanism for vessels travelling through the Strait of Hormuz had been positive.

Qatar, another key mediator between Washington and Tehran, said it was continuing to work with other mediators to seek a diplomatic resolution to the war. It said, however, that no direct talks were currently planned.

The Strait of Hormuz has been a central issue in efforts to ease the conflict. Before fighting began in late February, the waterway handled about one-fifth of the world’s daily oil and liquefied natural gas supplies.

Iran has halted most traffic through the strait since the conflict began, while the US has imposed a naval blockade on Iranian ports in the region.

The disruption has increased reliance on alternative shipping routes. Saudi Arabia’s ports in the Red Sea have faced a separate blockade imposed by Yemen’s Iran-backed Houthis since 20 July.

That route became an important alternative after Iran restricted traffic through the Strait of Hormuz, but security concerns have grown. A number of attacks on vessels have been reported over the past week.

On Tuesday, an Indian-flagged vessel sank near Yemeni waters after being struck by a projectile, India’s shipping minister said. All 14 people aboard were rescued.

Analysts have described the threat to vessels carrying oil in the Middle East as being at its most serious since the war began.

“Investors are acutely aware of how many times we’ve already been at this point in the war and how fragile the process of securing lasting agreements can be,” said Danni Hewson, head of financial analysis at AJ Bell, in the same article.

The disruption has also pushed up fuel costs for motorists. In the UK, the average price of petrol has reached £1.60 a litre, according to the RAC motoring group, putting prices at levels seen at the start of the conflict.

In the US, average gasoline prices are above $4 a gallon, according to AAA, while diesel is close to $5.40 a gallon.

Oil prices have swung sharply as the conflict has developed, climbing above $120 a barrel during periods of escalation before falling when negotiations have raised hopes of a breakthrough.

The higher prices have contributed to bumper profits at major oil companies including BP, Shell, Chevron and Exxon Mobil.

Hewson said that despite those large revenues, oil companies remained vulnerable to the decisions and actions of US President Donald Trump.(MyTVCebu)Oil prices plunge on hopes ships could soon return to Strait of Hormuz

By Patricia Andrea Pateña-Matheu