Oil prices dip to 4-month lows as Hormuz shipping resumes

The Strait of Hormuz has witnessed significant resumption of shipping activity following the interim peace agreement between Iran and the US. According to NDTV Profit, ship-tracking data showed that three stranded supertankers passed through the strait on Tuesday, with seven empty Qatar-linked liquefied natural gas tankers entering the region in recent weeks. An evacuation plan to enable hundreds of ships with 11,000 seafarers stranded in the Gulf to sail through the strait is now underway after the U.S.-Iran ceasefire deal. On Tuesday, Oman and Iran agreed to press on with discussions about the future administration of navigation in the Strait, with US Secretary of State Marco Rubio stating that Iran would not be able to charge tolls in the key waterway as part of any final agreement with the United States, saying such an arrangement would violate international law. An Iranian military source told Fars news agency that a limited number of vessels are being allowed to pass through the strait each day under coordination with Iran's Revolutionary Guards Navy.

Crude oil prices experienced a dramatic collapse, with WTI crude falling nearly 3% to around $74.52 and Brent dropping 2.7% to roughly $77.40, both benchmarks hitting their lowest levels since early March. However, Brent crude fell nearly 2% to around $79 per barrel today, its lowest level in about three months after having traded near $83 per barrel earlier, as reported by Goodreturns. The oil price decline was attributed to the signed US-Iran peace memorandum and the early reopening of the Strait of Hormuz, which are draining the enormous war premium that had inflated oil prices for months. The scale of the reversal is staggering, with oil falling roughly 38% since reaching a four-month high in April when the de facto closure of Hormuz following the February outbreak of the US-Iran conflict had choked off a massive share of global seaborne supply. However, both US WTI and Brent Crude held a volatile tone after President Donald Trump issued new warnings to Iran. Trump told reporters, "If Iran does not comply with the peace agreement or if they're not behaving. I will do what I have to do." The US-Iran peace talks are at the heart of attention for global market, which is expected to ease geopolitical tensions and curb global energy crisis, but Trump's latest statements have created visible divergence between the two nations despite their first round of talks in Switzerland.

The hopes of conclusion of the 4-month-long US-Iran war are currently high after war mediators, Pakistan and Qatar said in a joint statement on Monday after high-level talks at the Bürgenstock resort in Lucerne, Switzerland that the United States and Iran have agreed on a roadmap to reach a final deal within 60 days. According to the joint statement, "The High Level Committee has agreed upon a roadmap towards reaching a final deal within 60 days, laying the foundation for the immediate commencement of further technical talks." The agreement, formally signed as a 14-point Memorandum of Understanding on June 17, is not a final peace deal but a general plan that starts a 60-day negotiation window which can be extended by mutual consent. The key points include Iran and the US agreed to end the war on all fronts including Lebanon immediately and permanently, and to refrain from the threat or use of force against each other. Washington agreed to lift its naval blockade of Iran, while Tehran agreed to restore commercial transit through the Strait of Hormuz at pre-war levels. The US has committed to stop all types of sanctions against Iran including UN Security Council resolutions, IAEA resolutions, and all unilateral US sanctions as part of the final deal, while Iran, in turn, has said that it shall not procure or develop nuclear weapons. However, Iran's nuclear program remains a major point of contention after Vice President JD Vance said Tehran had agreed to admit nuclear inspectors, a claim Iranian officials have denied. A Truth Social post by US President Donald Trump said: "Everybody is fully aware that Iran will agree to have Major Weapons Inspections in order to ensure "Nuclear Honesty" long into the future."

Despite the progress in peace negotiations, UBS noted that so far, so good-but hope is not certainty. No treaty text has been published so far, and it is unclear how much agreement there is between the warring parties on the key points of dispute. This raises several questions: How durable is the de-escalation? Which sanctions could actually be eased? Which frozen assets will Iran receive back and when? And how robust is an agreement if the most difficult issues-from Iran's nuclear program to the regional security order-are to be negotiated only over the coming 60 days? As per ING Think, looking ahead, the key uncertainty remains how quickly oil flows through the Strait of Hormuz can normalise. While the consensus is that this normalisation will take months rather than weeks, price action in the oil market suggests a more rapid recovery. Clearly, the evolution of US-Iran talks will be crucial to how quickly energy flows resume. As we've seen in recent days, the ceasefire remains fragile, there's a very real risk of a further flare-up in tensions. Markets are pricing in better prospects, but not yet lasting peace, as per UBS, with investors still focusing on quality, diversification, and real sources of income amid the ongoing uncertainties. However, prediction markets back that view and align with veteran trader Dan Dicker's choked Hormuz possibility. On Kalshi, traders see only about a 51% chance that Strait of Hormuz traffic returns to normal by September, with full confidence not arriving until 2027.