Oil Prices Plummet as Market Overreacts to Hormuz Deal Rumors

Oil prices took a hit on Thursday, with WTI crude futures trading at $83.51, down $3.13 or 3.61% for the week. The market had opened near its weekly high of $86.57 but quickly dropped to $79.62 as traders sold off shares based on reports that Iran, Oman, and the US were nearing a deal to reopen the Strait of Hormuz.

However, the tone shifted when Iran fired on a vessel near Oman, and President Trump rejected terms tied to reviving the June Iran ceasefire agreement. This led to a bounce in oil prices as traders realized there was still no final deal in place.

The physical supply data does not support the size of the weekly break, indicating that the market may have overreacted to the news. The Iranian Revolutionary Guards announced an agreement with Oman over control and revenue sharing in the Strait of Hormuz, but a senior Iranian source revealed that the deal was still not final.

Iran wants certain conditions met before allowing ships to use the central channel, including an end to the regional war, sanctions relief, and compensation. The US is not signing off on these terms, with Trump stating that Washington would not return to the prior ceasefire terms. This is not a peace deal but rather a list of demands.