Oil prices extended their slide for a fourth straight session on Thursday, with traders betting that renewed diplomacy between Tehran and Doha could finally pry open the Strait of Hormuz and ease months of supply anxiety stemming from the war in the Middle East.
Brent crude futures dropped $1.36, or 1.55%, to $86.48 a barrel by 08:00 GMT, its fourth consecutive daily decline. West Texas Intermediate fell even further, shedding $1.40, or 1.7%, to $80.83 a barrel, marking a fifth straight day of losses and underscoring how quickly sentiment has shifted in a market that, for months, priced in the risk of prolonged disruption rather than resolution.
The catalyst for Thursday’s selloff was news that Qatar’s prime minister is set to travel to Iran later in the day to relaunch talks aimed at ending a conflict now approaching its sixth month.
The trip lands at a delicate moment: fighting on the ground has largely paused, yet no lasting diplomatic settlement has emerged, leaving global energy markets to parse every diplomatic signal for clues about the fate of one of the world’s most strategically vital waterways.
At the core of the standoff is the question of who controls, or at least guarantees, safe passage through the Strait of Hormuz, the narrow chokepoint that Iran has wielded as a bargaining chip throughout the conflict.
Before hostilities erupted in late February, the strait carried roughly one-fifth of the world’s daily oil and liquefied natural gas flows, making it arguably the single most consequential piece of maritime real estate for global energy security.
Market analysts said Thursday’s price action reflected a market recalibrating its risk premium rather than reacting to a concrete deal.
“Oil has weakened again today as the market prices in rising expectations that a deal could materialize, which would increase shipping numbers through the Strait of Hormuz,” said Tim Waterer, chief market analyst at KCM.
He cautioned, however, against assuming crude would collapse back to pre-war levels even if an agreement is struck: “If Hormuz were to reopen more fully, a further leg lower in crude is possible, but the market is unlikely to price a complete return to pre-conflict levels overnight.”
That note of caution was echoed by Priyanka Sachdeva, head of market insights at Phillip Nova, who pointed out that the diplomatic track record so far has been shaky at best. “At the heart of the dispute remains Iran’s nuclear program, and that is unlikely to be resolved quickly,” she said.
“Iran also understands the importance of its geographical position and the leverage that the Strait of Hormuz provides, so the risk of prolonged uncertainty remains.”
Adding to the sense that pressure may be easing, shipping traffic through the strait ticked up slightly on Wednesday, according to tracking data, even as the broader standoff continued.
Separately, a senior Iranian source said Wednesday that Tehran and Oman were finalizing the details of an arrangement to jointly manage passage through Hormuz, after Iran’s Revolutionary Guards indicated the two countries had reached an understanding on how to share the waterway.
Those developments, taken together with the U.S. decision to pause its strikes on Iranian targets for roughly a month, have fed a growing if still fragile belief among investors that the worst of the supply disruption may be behind the market.
Washington, for its part, appears to be leaning toward economic pressure rather than military escalation as its primary tool going forward, a shift that traders have interpreted as reducing the near-term odds of a fresh flare-up.
Still, few in the market are treating a full resolution as imminent. The unresolved dispute over Iran’s nuclear program remains the central obstacle to any lasting settlement, and Tehran’s awareness of its geographic leverage over Hormuz means the waterway is likely to remain a bargaining chip rather than a settled issue for some time yet.
For now, oil traders appear content to keep trimming the war-risk premium built into prices over recent months, but, as both Waterer and Sachdeva suggested, they are doing so cautiously, wary that any stalling in the Doha-Tehran talks could just as quickly send prices climbing back in the other direction.
WHAT YOU SHOULD KNOW
Oil’s four-to-five-day slide comes down to one thing: hope, not certainty. Prices are falling because markets are betting that Qatar-brokered talks plus a possible Iran-Oman arrangement could reopen the Strait of Hormuz. But nothing is signed yet, Iran’s nuclear standoff remains unresolved, and Tehran still holds real leverage over the strait.
This is a risk-premium unwind on expectations, not a resolved crisis, so the rally in oil’s decline could reverse quickly if talks stall.**
