Analysts: deal alone won’t restore prewar oil flows
Oil prices fell for a third straight session after Iran and Oman announced a proposed framework to temporarily reopen the Strait of Hormuz. The benchmarks were on track to settle at their lowest levels in close to two weeks.
Brent crude oil for October delivery fell 2.6% to $86.62 a barrel, while West Texas Intermediate dropped 2.7% to $80.12 a barrel after earlier trading below the $80 mark.
The diplomatic move came in a joint statement issued in Tehran, where Iranian and Omani foreign ministers said they had discussed a proposed framework to establish a temporary shipping route through the waterway. Under the framework, Iran and Oman would also work together to clear the strait of mines.
President Donald Trump said in a Truth Social post Tuesday that the U.S. Navy had removed or detonated all mines in the strait. Some analysts expressed doubt about that claim.
Negotiations between the two countries will continue “with a view to agreeing on a permanent navigational corridor and future administration of the strait,” the joint statement said.
ING analysts Warren Patterson and Ewa Manthey cautioned that, while positive, an agreement between Oman and Iran alone would not result in oil flows through the strait returning to prewar levels. “We would likely need to see the U.S. lift its blockade on Iranian ports and ease sanctions on Iran before we see any move towards normalization,” they wrote.
The price drops came amid other signals suggesting diplomatic momentum in the region. Axios reported that around 40 ships transited the strait over the weekend, and The New York Times reported that U.S. diplomats would return to the Middle East.