Hormuz Progress Lifts Oil Prices, But Risks Remain High

Oil prices fell on Thursday as investors bet that progress between Iran and Oman could lead to the reopening of the Strait of Hormuz, but risks remain high.

The agreement between the two countries involves a proposed shipping route through the strait, with vessels entering the Gulf overseen by Oman and outbound traffic controlled by Iran. However, this arrangement remains sensitive due to opposition from Washington, which has expressed concerns about allowing Tehran to control access or charge fees in one of the world's most important energy corridors.

Nomura economist Yuki Takashima noted that prices had returned to levels seen around the June 17 interim agreement, leaving the market focused on whether the US and Iran can convert another temporary understanding into a lasting settlement. The stakes remain high, with the Strait of Hormuz carrying 20.9 million barrels per day in the first half of this year, equal to about 20% of global petroleum consumption.

The Energy Information Administration expects global production and trade to move closer to pre-conflict levels by year-end, forecasting Brent to average $74 a barrel during the third quarter. However, ING analysts warn that Hormuz traffic remains below pre-war levels, and renewed military escalation could quickly disrupt the supply recovery.