Oil prices fall on hopes Strait of Hormuz could reopen
Oil prices dropped to a three-week low on Tuesday after senior U.S. officials said negotiations with Iran had made progress, raising hopes that the Strait of Hormuz could soon reopen to commercial shipping.
U.S. Secretary of State Marco Rubio and Treasury Secretary Scott Bessent both said discussions had advanced, with Bessent suggesting an agreement could be reached as early as Tuesday or Wednesday.
Brent crude, the global oil benchmark, fell nearly 5% to below $80 a barrel as traders anticipated that an easing of disruptions could restore supplies. U.S. West Texas Intermediate crude also dropped more than 5% to around $76 a barrel. Both benchmarks reached their lowest levels since July 13.
Rubio said talks involving Iran and Oman had made progress on allowing more vessels to pass through the Strait of Hormuz, although he stressed that no final agreement had yet been reached.
“There’s been progress made in those talks, but not finality yet,” Rubio told reporters, adding that the U.S. hoped for a breakthrough soon.
Bessent separately told CNBC that there was a possibility of reaching an agreement within days that could reopen the strategic waterway and move the conflict toward a more normal situation.
However, the U.S. government has not provided details about what a potential agreement would involve. Iran has denied negotiating directly with Washington, saying instead that it is holding discussions with Oman, which is acting as a mediator.
Iran’s foreign ministry said talks with Oman over arrangements for ships using the Strait of Hormuz had been positive.
Qatar, another key mediator between Washington and Tehran, said it was continuing diplomatic efforts to end the conflict but acknowledged that no direct negotiations were currently scheduled.
The prolonged conflict has also placed significant pressure on U.S. military resources. Two sources familiar with the situation told CBS News, the BBC’s U.S. news partner, that the United States has used nearly all of its global stockpile of long-range precision missiles.
The Strait of Hormuz has remained a major focus of the conflict. Before hostilities began in late February, the waterway carried roughly one-fifth of the world’s daily oil and liquefied natural gas supplies.
Iran has largely halted maritime traffic through the strait since the conflict began, while the U.S. has imposed a naval blockade on Iranian ports in the region.
A separate blockade has affected Saudi Arabian ports in the Red Sea, where Yemen’s Iran-backed Houthis have disrupted shipping since July 20.
The Red Sea route became an important alternative after traffic through the Strait of Hormuz was restricted, but attacks on commercial vessels have made the route increasingly dangerous.
On Tuesday, an Indian-flagged vessel sank after being hit by a projectile near Yemeni waters, according to India’s shipping minister. All 14 people aboard were rescued.
Analysts say the risks facing oil tankers and other commercial vessels in the Middle East are now at their highest level since the conflict began.
Danni Hewson, head of financial analysis at AJ Bell, said investors remained cautious because previous attempts to reach agreements had failed and any lasting deal could prove fragile.
The disruption has also pushed up fuel prices for consumers worldwide. In the UK, the average price of petrol has risen to about £1.60 per litre, according to the RAC. In the United States, average gasoline prices have climbed above $4 a gallon, while diesel is approaching $5.40.
Oil prices have previously surged above $120 a barrel when the conflict intensified, only to fall when negotiations appeared to be making progress.
Higher crude prices have contributed to strong earnings for major oil producers, including BP, Shell, Chevron and Exxon Mobil.
However, Hewson said the companies remained vulnerable to political developments and decisions by U.S. President Donald Trump.
Trump warned Iran on Monday that it faced its “last chance” to reach an agreement that would allow commercial shipping through the Strait of Hormuz to resume. He also said he had postponed planned “massive” strikes against Iran to give negotiations another opportunity.
Meanwhile, U.S. stock markets traded higher on Tuesday, supported by the decline in oil prices following news of the negotiations and stronger-than-expected corporate results linked to artificial intelligence.
Wall Street investors have remained cautious as earnings from major technology companies indicate that spending on AI infrastructure and technology is expected to continue rising sharply.
Source: BBC
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