The latest
Oil extended its steep decline on Tuesday as optimism grew that talks between the US and Iran could make progress, with both sides continuing to hold off on attacks.
Brent fell below $88 a barrel after dropping 8.7% on Monday, its largest decline in more than three months. West Texas Intermediate traded near $82.
President Donald Trump said he paused US strikes to give negotiations another chance and believed there was a “good chance” of progress. It remains unclear, however, whether substantive talks are underway.
Details:
- Prices: Brent for September settlement fell 0.5% to $87.88 a barrel at 1:43 p.m. in Singapore, while WTI declined 0.4% to $82.28.
- Sharp swings: Brent briefly rose above $100 this month as the US-Iran conflict intensified and spread to the Red Sea, before retreating as tensions eased.
- Hormuz obstacle: Shipping through the strait has yet to return to normal, limiting confidence that the de-escalation will last.
- Limited traffic: Only four vessels crossed Hormuz on Monday, according to Kpler, although some ships may have sailed with their transponders switched off.
- Bab el-Mandeb: About 25 commodity vessels passed through the waterway on Monday, including several carrying Russian oil cargoes.
- Diplomatic outreach: Iranian Foreign Minister Abbas Araghchi held calls with his Saudi and Omani counterparts and called for cooperation over Hormuz.
- Omani mediation: Iran and Oman are discussing an agreement to restart shipping through the conduit, which carried a fifth of daily global oil flows in peacetime.
- Iranian pause: Iran’s military said it halted attacks on US bases and troops after Trump suspended American strikes.
- Washington meeting: Trump is scheduled to discuss Iran with Israeli Prime Minister Benjamin Netanyahu in Washington.
- Supply relief: Kazakhstan’s main export terminal resumed loading after Ukrainian drone attacks disrupted operations, with two tankers loading near Russia’s Novorossiysk port.
- Potential surplus: Macquarie warned that the market could face a daily surplus of 2 million barrels in the fourth quarter if an agreement removes supply disruptions.
Between the lines
The decline reflects expectations that diplomacy may succeed, but it does not mean the geopolitical risk premium has disappeared. Continued disruption in Hormuz leaves prices vulnerable to another surge if negotiations or the military pause collapse.
What to Watch:
The actual return of tanker traffic through Hormuz, the outcome of the Iran-Oman discussions and Trump’s meeting with Netanyahu will determine whether oil’s decline becomes a sustained trend or merely a pause between rounds of escalation.
