Oil Prices Plummet on Hormuz Diplomacy
Oil prices plummeted on Wednesday as diplomatic efforts between Iran and Oman aimed at resolving the Strait of Hormuz crisis gained momentum, reducing the risk premium that had driven Brent crude towards $95 just days ago.
Brent crude dropped about 2.6% to $86.28 a barrel, while US West Texas Intermediate fell 2.5% to $80.29 by late Asian trading, leaving crude down roughly 6% in two sessions as traders reassessed the risk of a prolonged disruption to Gulf exports.
The talks between Iran and Oman are focused on establishing an interim framework for a temporary maritime corridor through Hormuz while work continues on a more permanent arrangement, which includes navigation management, information sharing, and mine clearance. However, Iran has not agreed to an unconditional reopening of the strait and is still linking it to US sanctions and the blockade of Iranian ports.
Despite this, the prospect of more vessels moving through Hormuz has triggered heavy selling in the oil market, with Brent falling faster than WTI due to its direct exposure to international seaborne supply. Deutsche Bank strategist Peter Sidorov told MarketWatch that oil traders have shifted into a cautious wait-and-see stance as diplomatic activity increases and immediate conditions around the strait appear relatively stable.