Crude oil prices extended their decline in Tuesday’s trade, falling more than 5%, as growing hopes of a diplomatic breakthrough between the United States and Iran eased concerns over potential supply disruptions.
The international benchmark Brent crude dropped another $5 per barrel, or 5.7%, to an intraday low of $80.67. The US benchmark WTI crude also remained under pressure, falling $4, or 5%, to $77.83.
After rallying sharply in recent weeks, oil prices have cooled following the US decision to pause military strikes on Iran over the weekend. Fresh reports of renewed diplomatic engagement have further reduced the geopolitical risk premium embedded in crude prices.
The latest optimism stems from diplomatic efforts involving regional players. Iranian Foreign Minister Abbas Araghchi reportedly discussed the security of the Strait of Hormuz during separate phone calls with his Saudi and Omani counterparts, according to a statement published on his Telegram channel on Tuesday.
According to the statement, Araghchi discussed the latest bilateral and regional developments and stressed the need to strengthen cooperation and advance joint diplomatic efforts to promote stability across the region.
Adding to hopes of de-escalation, Oman has presented Iran with a Gulf-backed proposal to manage the Strait of Hormuz, including a mechanism to collect voluntary transit fees from vessels using the strategic waterway, according to Reuters, citing a Gulf source and a Western diplomat.
However, a senior Iranian official told Reuters that Tehran has yet to respond to the proposal, which is intended to form the basis of an agreement to end disruptions to trade through the Strait of Hormuz caused by the US-Israeli conflict with Iran.
Meanwhile, US President Donald Trump, who suspended the military campaign against Iran over the weekend, said “good talks” were underway with Tehran but warned that military action could resume if negotiations fail.
In an interview with Axios, Trump said diplomacy remained the preferred option but cautioned that the window for negotiations was limited. “We are in very deep talks with Iran. If they don’t work out, we will go back to very strong military action,” Axios quoted him as saying.
Brent down nearly 20% in three sessions
With Tuesday’s decline, crude oil has extended its losing streak to a third consecutive session. Based on today’s intraday low, Brent crude has fallen nearly 20% from last week’s peak, while WTI crude is down about 15.6% over the same period.
Last week, Brent briefly surged above $100 per barrel, its highest level in nearly two months, after the United States intensified its military campaign against Iran and Tehran escalated attacks on US military installations across Gulf nations, fuelling fears of supply disruptions.
The possibility of Iran disrupting shipping through the Strait of Hormuz had prompted the United States to intensify its military campaign in an effort to weaken Tehran’s control over the strategically important waterway.
Before announcing the pause in military action, Trump had also ruled out near-term negotiations with Iran and warned of broader military action, including possible strikes on the suspected nuclear facility at Pickaxe Mountain.
(With inputs from Reuters)
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