The scale of the drop, roughly 5% across both benchmarks, points to a meaningful unwinding of the geopolitical risk premium that has been embedded in crude since the conflict began, rather than a shift driven by fundamentals such as supply or demand. Prices reversed course intraday, initially gaining on reports that Iran wants greater control over inbound shipping before falling as officials signalled that a broader deal was within reach. That volatility underscores how sensitive the market remains to headline flow around the strait, with traders likely to keep pricing and repricing supply risk as talks progress. Goldman Sachs’ guidance for Brent to trade in an $80 to $90 range until there is either a confirmed deal or a fresh escalation gives the market a rough anchor, but the wide range itself reflects how much uncertainty is still in play.
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Earlier:
Crude fell sharply as diplomatic signals around a possible Hormuz deal chipped away at the war risk premium built into prices since February.
Summary:
- Brent crude fell around $4.40, or roughly 5%, to settle near $79 a barrel, its lowest since mid-July
- WTI crude settled down nearly 6%, at around $76 a barrel, also a three-week low
- Both benchmarks traded in wide ranges during the session, with WTI moving between roughly $75 and $82, and Brent between roughly $79 and $86
- US Secretary of State Marco Rubio said talks with Iran and Oman were progressing on moving more ships through the strait, though no final agreement had been reached
- Qatar’s Foreign Ministry said diplomatic efforts to resolve the conflict were continuing, and Qatar’s Emir and President Trump had discussed de-escalation
- Prices gained earlier in the session after a senior Iranian source said Tehran wants control over inbound shipping and oversight of outbound traffic as part of a plan being discussed with Oman
- Shipping traffic through the Strait of Hormuz and Bab el-Mandeb remained little changed at the start of the week
- Saudi Aramco’s chief said the world has lost more than 2.6 billion barrels of oil since the Iran war began in February
- Goldman Sachs expects Brent to trade between $80 and $90 a barrel until there is confirmation of a US-Iran agreement or a significant escalation
Oil prices fell sharply on Tuesday, settling around 5% lower and touching a three-week low, after comments from Qatari and US officials raised hopes that diplomatic progress could soon ease shipping disruptions through the Strait of Hormuz. Brent crude futures dropped roughly $4.40, or about 5%, to settle near $79 a barrel, while US West Texas Intermediate futures fell nearly 6% to settle around $76 a barrel. Both marked the lowest closing levels since mid-July.
US Secretary of State Marco Rubio said talks with Iran and Oman were progressing on moving a greater volume of shipping through the strait, though he cautioned that a final agreement had not yet been reached. That followed earlier comments from Treasury Secretary Scott Bessent, who suggested a deal to reopen the strait could come within a day. Qatar’s Foreign Ministry spokesperson said diplomatic efforts toward resolving the conflict were continuing, and the Qatari Emir’s office said the Emir and President Trump had discussed ways to reduce escalation and narrow the gap between Washington and Tehran’s positions.
The session was not a straight line lower. Prices initially rose after a senior Iranian source told Reuters that Tehran is seeking control over inbound shipping through the strait, along with visibility over outbound traffic and the ability to intervene if necessary, as part of a plan being negotiated with Oman. Reporting indicated the emerging Iran-Oman proposal would give Iran full authority over ships entering the strait, with Oman handling departures after notifying Iran, an arrangement the United States would likely reject on the grounds that it conflicts with principles of free navigation. Crude pared its gains and then extended losses as subsequent headlines pointed to further progress, even as reports emerged overnight of a strike on a US base in Kuwait.
Shipping activity itself has yet to reflect any of the diplomatic momentum, with traffic through the Strait of Hormuz and the Bab el-Mandeb waterway little changed at the start of the week. Analysts noted that Gulf export flows remain under pressure, with transits through the strait only marginally improved from severely depressed levels amid ongoing attacks on vessels. The head of Saudi Aramco said the war, which began in February, has cost the world more than 2.6 billion barrels of oil in lost output.
Looking ahead, market participants expect crude to stay highly sensitive to political headlines. Goldman Sachs said it expects Brent to hold within an $80 to $90 a barrel range until there is either confirmation of a finalised US-Iran agreement or a significant escalation in attacks, a framing that leaves the market’s near-term direction largely in the hands of the diplomatic process rather than underlying supply and demand.
This article was written by Eamonn Sheridan at investinglive.com.