Oil Prices Volatile as Iran-Oman Hormuz Talks Spark Reopening Hopes
Crude prices dropped on Thursday as ongoing diplomatic talks between Iran and Oman raised investor expectations for a potential peace agreement and the reopening of the Strait of Hormuz. Brent crude futures fell 37 cents, or 0.5%, to trade at $79.08 a barrel by 0024 GMT. Meanwhile, US West Texas Intermediate futures declined 53 cents, or 0.7%, landing at $74.69 a barrel.
Oman-Iran Talks and Proposed Hormuz Control
The downward price pressure followed reports that negotiations between Iran and Oman are making progress. A proposed arrangement to help end the US-Iran conflict would grant Tehran control over ships entering the Gulf through the Strait of Hormuz. Nomura Securities economist Yuki Takashima noted that the market reaction simply returned prices to the levels recorded after the United States and Iran signed an interim peace agreement on June 17.
Regional officials and a senior Iranian source confirmed the outlines of the arrangement. However, the proposal has encountered resistance from Washington. While President Donald Trump stated that a deal to reopen the strait is imminent, US officials have maintained that Washington would never consent to Iran controlling access to the world’s most important trade route for energy supplies.
Regional Security Pressures and Houthi Attacks
Market optimism regarding an end to shipping disruptions remained constrained by ongoing military activity in the Red Sea and Gulf of Aden. Yemen’s Iran-aligned Houthis announced on Wednesday that its forces launched missile attacks targeting two separate Saudi oil tankers—one off the coast of the Red Sea port city of Yanbu and another in the Gulf of Aden. Saudi Arabia did not confirm either incident.
Adding to regional tensions, five sources reported that Iran has warned Gulf states that any new US attack on its territory would trigger retaliation against critical energy infrastructure across the region. Analysts point to these overlapping security threats as a reason why optimism about the outlook for an end to shipping disruptions in the Middle East is limited.
US Crude Inventories and Refiner Activity
Data released Wednesday by the Energy Information Administration showed that US crude inventories rose by 2.5 million barrels to reach 407 million barrels during the week ending July 31. That build exceeded expectations in a Reuters analyst poll, which had projected a 1.5 million-barrel draw.
As investors monitor whether Washington and Tehran can reach a final deal, market participants await official responses from the US government regarding the proposal.