Hormuz Deal Fails to Ease Oil Price Risks
Oil prices have dipped towards $80 per barrel as hopes rise for a deal to restore shipping through the Strait of Hormuz, but traders are warning that the market is more fragile than ever.
The US, Iran, and Gulf states are negotiating an interim agreement that would establish designated safe shipping routes through the strait, which carries around one-fifth of the world's oil and liquefied gas supplies.
However, the deal may not be as straightforward as it seems. Iran has strengthened its position in recent months, global refining capacity has declined, inventories have been depleted, and the number of potentially vulnerable chokepoints has increased.
The market is signaling a near-term supply squeeze rather than a temporary glut, with near-term Brent contracts trading at a premium of around $1.50 per barrel over November contracts.