Oil Prices Plunge on US-Iran Talks Hints and Strait Reopening Rumors
Oil prices took a hit after reports hinted at possible US-Iran talks and a potential reopening of the Strait of Hormuz, easing fears of an imminent supply shock.
The West Texas Intermediate (WTI) crude oil benchmark slid 2.7% to $93.20 a barrel, while Brent fell 2% to $98.33 as traders reacted to the diplomatic thaw.
Iranian President Masoud Pezeshkian is expected at the United Nations General Assembly in New York, and CNBC reported that he could outline Iran's stance on 'international developments'.
A senior Iranian official told Japan's Kyodo News that Iran would reopen the Strait of Hormuz within seven days if the US eases military pressure.
The development suggests that some of the geopolitical risk premium built into oil prices is unwinding, according to Saxo Bank. This means that traders are stripping out some of the extra price tied to conflict risk, which can fluctuate rapidly on encouraging headlines.