Iran and Oman have reached an agreement on a proposed shipping route through the Strait of Hormuz, raising the prospect of some energy flows resuming through the critical waterway. According to Bloomberg, a joint statement from both countries is under review, and a deal would be struck if third parties don't obstruct the process, an Iranian official said. Iranian Deputy Foreign Minister Kazem Gharibabadi told domestic media that the route would be temporary and remain active for "two to four months," adding that "this understanding does not mean the full reopening" of the strait. West Texas Intermediate traded near $75 a barrel, after losing 11% in the week's first three sessions, while Brent closed above $79 on Wednesday. Crude prices have declined on optimism that some form of accord to restore traffic through the waterway is near, with US President Donald Trump touting yet again that a deal is close, though traders remain cautious about fully unwinding long positions.
U.S. Treasury Secretary Scott Bessent told CNBC that Washington and Tehran could reach an agreement to reopen the Strait of Hormuz as early as Tuesday or Wednesday. According to The Economic Times, such a deal would allow commercial vessels to move freely through the waterway. U.S. Secretary of State Marco Rubio said the U.S. was participating in talks involving Iran and Oman, while noting that negotiations were moving forward but no final agreement had been reached. Qatar, which is serving as a key mediator in the negotiations, said efforts were continuing to secure a short-term breakthrough that could pave the way for broader discussions between the U.S. and Iran. Trump and Qatar's Emir Sheikh Tamim bin Hamad Al Thani discussed efforts to narrow differences between Washington and Tehran and improve the prospects for a lasting settlement during a phone call on Tuesday, Qatar's Emiri office said. A Bloomberg report suggested Iran was considering allowing European countries to remove mines from the Strait of Hormuz, although Tehran has not officially confirmed this report.
In a sign of persistent risks to shipping in the Middle East, Iran-backed Houthi militants in Yemen said they targeted a Saudi oil tanker in the Gulf of Aden. According to Bloomberg, the group also threatened others in the Red Sea. The Iran-backed Houthis continue to pose a threat in the Red Sea, which has become a major export route for Saudi barrels during the war, with people familiar with the matter saying this week that the kingdom had held talks with the militants through Omani mediators in an effort to prevent the conflict from widening. Oil has slumped over the past two weeks as US President Donald Trump said he'd postponed new strikes on Iran to give talks more time, yet even if a short-term deal to normalize commercial shipping is reached, it might still fail to end the war or resolve Trump's concerns about the Islamic Republic's nuclear program. Prior to the beginning of the war, some 20% of the world's oil and liquefied natural gas transited through the strait, and in March alone prices rose 50%.
"US oil prices have already fallen below $80 per barrel as the global oil market evaluates the potential of a deal with Iran," said Rob Thummel, senior portfolio manager at Tortoise Capital. "If a deal is reached, then it is possible for oil to head toward $70 per barrel." According to Bloomberg, crude prices have declined on optimism that some form of accord to restore traffic through the waterway is near, with US President Donald Trump touting yet again that a deal is close, still uncertainties remain and traders have been reluctant to fully unwind long positions, wary of being caught wrong-footed by a sudden escalation. "While the immediate geopolitical premium has unwound, the broader supply picture warrants caution," said Priyanka Sachdeva, head of market insights at Phillip Nova. "If diplomatic efforts fail and physical supply is ultimately affected, the current pullback could prove short-lived, with tighter inventories amplifying the impact of any future supply shock." Goldman Sachs has cautioned that Brent could rise to $120 a barrel if disruptions to shipping through the Strait of Hormuz continue, despite the current stabilization.
