Markets React: Oil prices drop on hopes of Strait reopening

Oil prices dropped sharply as investors reacted to reports that progress is being made in negotiations between the United States and Iran.

Brent crude, the global oil benchmark, fell by as much as 4.2% to just below $93 per barrel. US crude (WTI) also dropped by about 5.7% to below $89 per barrel.

The decline followed reports from Iranian state media suggesting a draft agreement that could reopen the Strait of Hormuz within 30 days.

The Strait is a key route for global oil shipments.

According to the report, Iran would return shipping through the Strait to normal levels, while the United States would withdraw its military presence and ease restrictions in the area.

Earlier in the week, oil prices had risen after the US carried out airstrikes in southern Iran, its first major military action since a ceasefire effort began.

The US described the strikes as defensive, while Iran warned against further escalation.

However, market attention has now shifted back to diplomatic efforts. US President Donald Trump has said both countries are close to restarting formal peace talks, with a possible ceasefire and reopening of the Strait being key conditions.

Reports that several oil tankers have already passed through the Strait have also helped calm fears of supply disruption.

Analysts say the market is now waiting for a clear and final agreement. They warn that prices could fall again if expectations are not met, especially if the Strait does not fully reopen.

Some experts believe global oil supply is still tight, and prices could rise again if stock levels continue to fall. Others predict Brent crude could stay close to $100 per barrel through the year, depending on how the situation develops.

In the United States, petrol prices have also risen to their highest level before the summer driving season since the 2022 energy crisis triggered by the Russia–Ukraine war.