Global oil prices suffered a sharp decline on Tuesday, with Brent crude falling below the $80-per-barrel mark for the first time in three weeks as investors grew increasingly confident that the United States and Iran were nearing a diplomatic agreement. The market reacted strongly to expectations that easing tensions in the Middle East could lead to the reopening of the Strait of Hormuz, a crucial shipping route responsible for transporting a significant portion of the world’s oil supply.
Brent crude dropped by $4.61, representing a 5.5 percent decline, to trade at $79.16 per barrel, while West Texas Intermediate (WTI), the US benchmark, fell by $4.70, or 5.85 percent, to $75.64 per barrel. The sharp sell-off came after encouraging comments from senior US officials, including Treasury Secretary Scott Bessent and Secretary of State Marco Rubio, who indicated that negotiations involving Iran and Oman were progressing and that an agreement could be reached within days.
Adding to the market’s optimism, President Donald Trump described a potential agreement aimed at reopening the Strait of Hormuz and limiting Iran’s nuclear programme as “imminent.” However, Iranian authorities adopted a more cautious stance, insisting there were no direct negotiations with Washington and emphasizing that discussions were being conducted through Omani mediators. Tehran has also called for increased authority over shipping activities in the Strait, including oversight of vessels entering and leaving the strategic waterway.
Despite growing optimism among investors, conditions on the ground have yet to reflect any major breakthrough. Shipping data showed that only six vessels passed through the Strait of Hormuz on Monday, down slightly from the previous day, while traffic through the Bab el-Mandeb Strait remained largely unchanged. Reports of a cargo vessel being struck near Oman also underscored that security risks continue to threaten maritime trade across the region.
Before conflict erupted earlier this year, nearly 20 percent of the world’s oil and gas supplies passed through the Strait of Hormuz, making it one of the globe’s most important energy corridors. Since then, Gulf producers have significantly reduced output, with Saudi Aramco estimating that more than 2.6 billion barrels of supply have been lost. Analysts believe the latest drop in oil prices reflects confidence in a possible diplomatic breakthrough rather than any actual improvement in oil flows. Goldman Sachs expects Brent crude to trade between $80 and $90 per barrel unless negotiations collapse or regional tensions intensify, suggesting investors may be pricing in positive developments before they officially materialize.
source: business day
