Oil Prices Plummet Amid Hope for Strait of Hormuz Deal
Oil prices plummeted by 11% in two days after news broke of negotiations between the US, Iran, and Oman to unblock the Strait of Hormuz. The negotiations are said to be close to concluding a 'temporary' agreement that would allow for the reopening of the strait. According to Axios, the agreement provides for a 60-day interim deal between Oman and Iran, where incoming vessels use the northern corridor through Iranian waters and outgoing vessels use the southern corridor through Omani waters.
No tolls or fees will be charged for 60 days, and the middle lane is expected to be cleared within 30 days. US President Trump has stated that the US is ready to launch its 'biggest attack' on Iran since World War II but has also said that the Strait of Hormuz will open 'very soon' or Iran will face severe consequences.
The blockade has put pressure on oil prices, with crude oil volumes on tankers increasing by 4.6% to 112.1 million barrels in the week of July 25-31. However, experts predict that reducing tensions in the Middle East will allow for 1-2 months to stabilize oil prices at $75-80/barrel and restore oil supplies from Iran.