Oil Plunges on US-Iran Deal Hopes to Reopen Hormuz Strait

Oil prices declined by about 4% on Tuesday, fueled by renewed diplomatic signals from the United States and Qatar, which raised hopes for a swift agreement with Iran to reopen the Strait of Hormuz and alleviate disruptions to global energy supplies. US Treasury Secretary Scott Bessent stated that a deal with Iran could be finalized as early as Tuesday or Wednesday. Speaking to CNBC, Bessent said, "We are in talks with the Iranians, and I think there is a chance we may have a deal today or tomorrow to open the Strait and move towards a more normalized position in this conflict."

These comments led to benchmark crude prices reaching their lowest levels in three weeks. Brent crude dropped $3.11, or 3.7%, to $80.66 a barrel, while US West Texas Intermediate (WTI) fell $3.58, or 4.5%, to $76.76 a barrel. Both contracts touched their lowest points since July 13th. The decline reversed earlier gains of more than 2%, as markets positively reacted to signs of diplomatic progress. Giovanni Staunovo, an analyst at UBS, noted that oil markets were responding to expectations that diplomacy could help restore energy flows through the critical waterway. He added that "Oil prices are pairing earlier gains on comments from Qatari officials saying a potential US-Iran resolution has been drafted."

The future of the Strait of Hormuz remains a central issue in negotiations between Washington and Tehran. Before the conflict began in late February, this strategic waterway handled approximately 20% of global oil and liquefied natural gas supplies, making it one of the world's most vital energy transit routes. Concerns over maritime security continue to impact shipping movements across the region. The UK Maritime Trade Operations agency reported an incident on Tuesday, approximately 20 nautical miles northeast of Oman's Al Khasab, after a cargo vessel indicated it had been struck by an unidentified projectile. Although Bessent mentioned observing "quite a few" ships leaving the Strait of Hormuz, industry participants remain cautious as negotiations proceed.

Goldman Sachs indicated that Brent crude is likely to remain within an $80-$90 per barrel range until there is clearer information on whether a new US-Iran agreement will be reached or if tensions will escalate again. While oil production across the Middle East has recovered from the lows seen during the conflict, analysts point out that output is still below pre-war levels, keeping the global market relatively tight. For now, investors are closely monitoring diplomatic developments, as hopes grow that a breakthrough agreement could help restore confidence, improve shipping access through the Strait of Hormuz, and ease pressure on global energy markets.