The price of oil has tumbled back to levels not seen since before the Iran war, as the first ships since February begin to edge through the Strait of Hormuz. Global benchmark Brent crude briefly dipped below $72.48 a barrel – the price it sat at the day before US and Israeli forces struck Iran on 28 February – before settling at $73.23.
The dramatic decline follows weeks of turmoil after Iran effectively closed the critical waterway in response to the attacks, sending energy costs soaring. But the mood shifted sharply on 17 June, when the US and Iran signed a Memorandum of Understanding setting out a 60-day window for negotiations on Tehran’s nuclear programme and other measures to end the war. Since then, the cost of crude has slid steadily.
“Oil price falls to pre-Iran war level as Strait of Hormuz traffic gradually resumes after US-Iran deal.”
Representatives from both sides met in Switzerland last weekend for talks, which resulted in the US partially lifting sanctions on Iranian oil exports. The number of vessels crossing the Strait of Hormuz has risen significantly since the deal was signed, according to maritime intelligence firm Kpler. Its latest data shows 284 ships have made the transit from 18 June – the day after the MOU – though that remains well below the pre-conflict average of around 138 crossings each day. Those vessels include tankers carrying crude oil, liquefied natural gas, fertiliser and other goods.
Qatar and Pakistan, acting as mediators, said in a joint statement on Monday that the US and Iran had formed a “communication line” to prevent misunderstandings “with the aim of safe passage for commercial vessels through the Strait of Hormuz”. Dimitris Maniatis, chief executive of maritime risk advisory firm Marisks, which works with ships stuck in the region, described a “tremendous shift” in recent days, with far more vessels using the strait. He said a limited number can cross a northern passage with Iranian permission, and the US navy has also provided guidance for a southern route safe from mines and other obstacles laid since the war.
Despite the progress, hundreds of ships still appear to be waiting in the Gulf, and the crossing numbers remain below pre-war levels. “Markets are still watching the region closely, and any renewed tensions could quickly send oil higher again,” warned Pratibha Thaker, regional director for the Middle East and Africa at the Economist Intelligence Unit. The US said it has agreed a deal with Iran to halt strikes and resume talks, but Tehran has yet to confirm an end to the tit-for-tat attacks that threaten the fragile truce. As the focus now shifts to how quickly fuel prices at the pump will fall after rising sharply when the war began, the strait’s slow reopening offers a cautious hope – but no guarantees.