Oil Traders Doubtful of US-Iran Deal Amid Precarious Energy Market

Global crude prices have dropped back to around $80 per barrel as oil traders bet on a US-Iran deal to reopen the Strait of Hormuz. This optimism, however, may be unwarranted given the increasingly precarious energy market.

The market's hope for a deal is reminiscent of the June 17 agreement that failed to materialize due to renewed fighting. The new arrangement likely involves an agreement between Iran and Oman to establish safe shipping lanes through the strait.

Tehran appears to have gained ground over the past two months, with control of Hormuz becoming the central issue in the conflict. While the June 17 ceasefire left the future status of the strait vague, the new arrangement will grant Tehran at least some influence over shipping.

Some Gulf producers may be willing to tolerate a compromise that restores part of their lost oil and gas revenue, but this comes with significant risks. The supply backdrop has changed dramatically since June, with only around 80 million barrels of oil remaining stored inside the Gulf.