Oil prices reversed early gains after officials indicated that a diplomatic agreement could be reached soon.
Markets expect a deal to ease tensions and restore oil movement through the Strait of Hormuz.
Highlights
- Brent crude futures fell by $3.95 to around $79.82 per barrel.
- US WTI crude dropped 5.38% to nearly $76.02 per barrel.
- Both benchmarks touched their lowest levels since July 13.
- Qatar, Pakistan and Oman are reportedly helping mediate between the US and Iran.
- A possible agreement could help fully reopen the Strait of Hormuz.
- Shipping and security risks in the Gulf and Red Sea remain a major concern.
Story
International crude oil prices fell sharply on Tuesday as hopes increased that the United States and Iran could soon reach an agreement to reduce tensions in the Middle East.
Brent crude and West Texas Intermediate, or WTI, declined by as much as 5% during the trading session. Both major oil benchmarks touched their lowest levels since July 13 as investors expected that a diplomatic agreement could improve global energy supplies.
Brent crude’s front-month contract fell by $3.95 to around $79.82 per barrel. It had earlier climbed to $86.33 before dropping to an intraday low of nearly $79.73 per barrel.
US WTI crude declined by $4.32, or 5.38%, to approximately $76.02 per barrel. It had touched a session high of $82.33 before reversing its gains.
Oil prices had initially risen by more than 2% because of uncertainty surrounding the US-Iran negotiations. However, comments from Qatari and US officials changed market sentiment and strengthened expectations that tensions could ease.
UBS analyst Giovanni Staunovo said the early rally ended after Qatar provided information about a possible draft agreement between the US and Iran. However, Middle East oil production remains below the levels seen before the conflict, which means supply pressures have not completely disappeared.
Qatar’s foreign ministry spokesperson Majed Al Ansari said efforts were continuing to find a diplomatic solution. Qatar, Pakistan and Oman are reportedly helping the two sides exchange proposals and continue negotiations.
US Treasury Secretary Scott Bessent also indicated that an agreement to fully reopen the Strait of Hormuz could be reached by Tuesday or Wednesday. The route is important because nearly one-fifth of the world’s daily oil and liquefied natural gas trade passed through it before the conflict began.
Despite hopes of an agreement, maritime security concerns remain. A cargo ship was reportedly attacked near Oman, while several Saudi oil tankers recently changed their routes to avoid risky waterways.
The developments suggest that oil shipments are gradually improving, but global crude prices may remain volatile until shipping routes become completely secure and supplies return to normal.
