Market Hopes for Hormuz Deal Outrun Oil Flows as Prices Slide

Oil prices are slipping as market hopes for a diplomatic solution to the Strait of Hormuz crisis seem to be outrunning the actual return of oil supplies. The latest development comes from Oman, which has presented a plan backed by Gulf states that would allow Iran to collect voluntary fees for using the strategic waterway under a joint regional arrangement.

The market is pricing in a deal that does not yet exist, despite the supply disruption that drove prices above $100 in Brent last week still being unresolved. According to reports, Hormuz traffic remains at a fraction of normal levels, while the Red Sea continues to take fire and Saudi Aramco has shut its 400,000 barrel-per-day Jazan refinery after an attack.

The US is reportedly having 'good talks' with Iran, but this optimism has yet to translate into improved oil flows. As a result, traders are booking profits and selling off their positions in the wake of last week's rally. The market's pricing of a deal that has not been finalized highlights the disconnect between diplomatic progress and actual supply disruptions.