Brent Slumps on Iran Deal Expectations Amid Dollar Weakness

The US dollar has weakened due to the country's involvement in foreign exchange interventions, particularly its coordination with Japan. Scott Bessent, the Treasury Secretary, stated that if the yen continued to weaken, it would trigger a chain reaction of other currencies depreciating against the dollar, harming US exporters and potentially fueling economic instability worldwide.

The drop in the USD index was also driven by news of a potential deal with Iran, which sent Brent crude prices plummeting to their lowest level since July 13. Mizuho believes that a deal unfavorable to the US will be concluded, failing to resolve outstanding issues. The main sticking point is the transit fee for the Strait of Hormuz, with Tehran seeking compensation for losses incurred during the conflict.

Traffic through the world's main oil artery remains subdued, with only nine vessels passing through the Strait of Hormuz compared to 130-140 before the conflict in the Middle East. The American Petroleum Institute estimates that traffic has fallen from 20 to 6 million barrels per day.