Oil Prices Plummet on Strait of Hormuz Deal Optimism
The price of oil plummeted on Tuesday, as news of a potential deal to reopen the Strait of Hormuz spread optimism. West Texas Intermediate (WTI) fell by $4.46 to $75.88, a 5.55% drop from Monday's settlement at $80.34. This marks a two-session decline of nearly $9 from Friday's close of $84.67, or a 10.4% drop.
Brent crude followed suit, breaking below the $80 mark and erasing a third of its July gains. It settled Monday at $83.77 after a 4.7% loss, having closed Friday near $88. The contract has swung 10% in two sessions on a headline rather than on a barrel.
The market is treating falling crude as disinflationary rather than as a demand signal. Equity markets read the move as an energy-specific event rather than a macro one, with the S&P 500 clearing its June 2 record close of 7,609.78 on the same session that energy sank 2.5%.
The near-term structure is binary and unhedgeable, with a signed agreement potentially taking WTI toward $70 and Brent toward $74, while a collapse in talks could rebuild the premium within days.