Oil Prices Plunge as Iran-Oman Talks Raise Hopes for Strait of Hormuz Reopening

Oil prices fell sharply on Wednesday as hopes grew that the Strait of Hormuz could partially reopen. Brent crude futures dropped $2.73, or 3.08%, to $85.85 a barrel by 10:12 GMT, while West Texas Intermediate (WTI) crude fell $2.21, or 2.68%, to $80.15 a barrel.

The fall in oil prices was largely due to fresh talks between Iran and Oman over the Strait of Hormuz, which have raised hopes that oil shipments through the important waterway could resume. Bjarne Schieldrop, chief analyst for commodities at SEB Research, said 'that sort of creates some optimism.'

Iran and Oman have been discussing how the Strait of Hormuz could be managed since the conflict began in February. The Strait is extremely important for the global energy market because about one-fifth of the world's oil and liquefied natural gas shipments passed through it before the US-Israeli war with Iran started.

Ole Hansen, head of commodity strategy at Saxo Bank, said the market has moved toward expecting a partial reopening of the Strait, negotiated shipping arrangements, and a lower risk of another military escalation. A successful deal could remove some of the extra price increase caused by geopolitical fears, according to Hansen.