Oil prices dropped sharply after the US signalled progress toward a potential agreement with Iran that could eventually reopen the Strait of Hormuz, easing fears over prolonged disruptions to global energy supplies. Global benchmark Brent crude fell as much as 5.4% to $97.97 a barrel, while West Texas Intermediate traded below $92. The decline marks Brent's fourth drop in five sessions and puts prices on track for their lowest close in more than a month.
The move came after Donald Trump said negotiations with Iran were progressing, although he cautioned that a final agreement had not yet been completed. “I won't rush into a deal,” Trump said in social media posts, adding that the agreement “isn't even fully negotiated yet.”
Despite the optimism, the US blockade around the Strait of Hormuz remains in place for now, with Washington saying restrictions will stay until a formal agreement is finalised. Energy markets have been volatile since the conflict erupted earlier this year after US and Israeli strikes on Iran triggered a broader regional crisis across the Persian Gulf.
Markets Start Pricing in Supply Recovery
The Strait of Hormuz — which normally handles roughly a fifth of the world's oil and liquefied natural gas trade — has been operating at a fraction of normal capacity due to overlapping restrictions imposed by both Tehran and Washington. Signs of improving maritime movement through the route have started easing supply concerns.
Bloomberg ship-tracking data showed an Iraqi crude supertanker headed for China crossed the US blockade line, while a liquefied natural gas tanker carrying cargo for India also exited the region. Iran's Tasnim news agency claimed 33 vessels passed through the strait after receiving permission from the Islamic Revolutionary Guard Corps Navy.
A full reopening of Hormuz would provide major relief for Asian importers including China, Japan and South Korea, all heavily dependent on Middle East energy supplies. The decline in oil prices also reflects expectations that easing energy costs could reduce inflationary pressure globally.
Kevin Hassett, Trump's chief economic adviser, said on Fox News that energy prices could “plummet” once an agreement is reached, potentially giving the Federal Reserve room to cut interest rates. Trump is also facing rising domestic political pressure ahead of the US midterm elections, with elevated fuel prices becoming an increasingly sensitive issue for American consumers.
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