Oil extends slide on expectations of smoother crude flows via Hormuz

Global oil prices fell by more than 1% on Wednesday, extending losses recorded earlier in the week as investors reacted to signs of improving oil shipments through the Strait of Hormuz and easing geopolitical tensions involving Iran.

The decline pushed benchmark crude prices to their lowest levels in nearly four months, reflecting growing optimism that disruptions to global oil supplies may be less severe than initially feared.

Brent crude futures dropped 78 cents, or 1.0%, to $76.30 per barrel, while U.S. West Texas Intermediate (WTI) crude futures fell by the same margin to $72.43 per barrel during early trading.

Both benchmarks had already recorded losses of around 1% on Tuesday, reaching their lowest closing levels since early March.

Market analysts attributed much of the decline to signs that maritime traffic through the strategically important Strait of Hormuz is gradually returning to normal following recent tensions in the region.

The narrow waterway serves as one of the world's most critical oil transit routes, with a significant portion of global crude exports passing through it each day.

According to analysts at ING, increased vessel movements through the strait have boosted confidence among traders that oil supplies will continue to reach international markets despite recent disruptions.

“Positive signals from the Persian Gulf are fuelling optimism about oil flows through the Strait of Hormuz. Vessel crossings increased in recent days, although they remain well below pre-war levels,” ING commodity strategists noted in a market report.

Ship-tracking data showed that at least three stranded supertankers successfully navigated the strait on Tuesday, while additional vessels are reportedly preparing to resume transit.

The development has helped calm fears of prolonged supply bottlenecks that had previously supported higher oil prices.

Another major factor influencing the market has been growing optimism surrounding diplomatic efforts between the United States and Iran.

Oil prices came under additional pressure after Washington reportedly granted Tehran a 60-day sanctions waiver following preliminary peace discussions, allowing Iran to continue selling crude oil on international markets.

Analysts say the move has raised expectations that global oil supplies could increase if negotiations continue to progress.

Tomomichi Akuta, Senior Economist at Mitsubishi UFJ Research and Consulting, said hopes for improved relations between Washington and Tehran are contributing significantly to the decline in crude prices.

“Crude oil prices were weighed down by hopes of easing U.S.-Iran tensions and a recovery in oil shipments through the Strait of Hormuz,” he said.

“Further progress in nuclear negotiations could push prices back to pre-war levels,” he added.

Diplomatic engagement in the region also continued this week, with Oman and Iran agreeing to maintain discussions regarding the future administration and management of navigation through the Strait of Hormuz.

The talks come amid broader efforts to stabilize maritime operations and ensure the uninterrupted flow of energy supplies through the Gulf.

Meanwhile, U.S. Secretary of State Marco Rubio warned that any attempt by Iran to impose transit fees on vessels using the strait would be inconsistent with international law.

Despite the positive developments, uncertainty remains regarding the long-term durability of any agreement reached between Washington and Tehran.

U.S. President Donald Trump stated on Tuesday that Iran had agreed to allow nuclear inspections indefinitely, a claim that Iranian officials subsequently disputed, saying no such commitment had been made during negotiations.

The United Nations' maritime agency has also initiated plans to facilitate the movement of hundreds of vessels that were stranded in Gulf waters during recent hostilities.

According to the agency, approximately 11,000 seafarers aboard hundreds of ships have been affected by restrictions on movement through the Strait of Hormuz.

The evacuation and transit plan follows the announcement of a ceasefire arrangement between the United States and Iran and is expected to gradually ease congestion in the region.

An Iranian military source quoted by the Fars News Agency said a limited number of ships are currently being permitted to pass through the strait each day under coordinated arrangements involving Iran’s Revolutionary Guards Navy.

While geopolitical developments have largely dominated market sentiment, investors are also closely monitoring supply and demand indicators from major consuming nations.

Market sources citing data from the American Petroleum Institute (API) reported that U.S. crude oil inventories fell by approximately 765,000 barrels during the week ending June 19.

The decline, however, was significantly smaller than market expectations.

A Reuters survey of nine analysts had projected an average drawdown of about 4.5 million barrels over the same period.

The smaller-than-expected inventory reduction suggests that oil demand may not be rising as rapidly as some traders had anticipated, adding further downward pressure on prices.

Analysts say the direction of oil prices in the coming weeks will largely depend on developments surrounding U.S.-Iran negotiations, shipping activity through the Strait of Hormuz, and the pace at which Middle Eastern oil producers restore export capacity.

While easing tensions have reduced immediate concerns about supply disruptions, markets remain sensitive to geopolitical developments that could quickly alter the outlook for global energy supplies.

For now, investors appear increasingly confident that oil flows through one of the world's most important energy corridors will continue, helping to keep prices under pressure despite lingering uncertainties.