The price of oil has fallen to levels not seen since before the Iran war, as vessel traffic through the Strait of Hormuz gradually resumes. Global benchmark Brent crude briefly dipped to $72.24 a barrel on Thursday—slightly below the $72.48 it fetched the day before US and Israeli forces launched attacks on Iran on 28 February—before edging up to $73.23, according to the BBC. Prices have fallen more than 20% this month, the Guardian reported.
The slide follows a Memorandum of Understanding signed by the US and Iran on 17 June, setting out a 60-day period for negotiations on Tehran's nuclear programme and other measures to end the war. Since then, the number of vessels crossing the strait has risen sharply. Maritime intelligence firm Kpler reported that 284 vessels had made the transit from 18 June, the day after the deal was signed—though that remains well below the pre-conflict average of about 138 crossings a day. Data from CNN and MarineTraffic showed traffic doubled over the previous 24 hours to its highest since late February.
“Oil price falls to pre-Iran war levels as tankers exit Strait of Hormuz.”
“A combination of strategic inventory releases, a collapse in demand from top buyer China and a substantial number of tankers quietly leaving the Persian Gulf ‘dark’ had contributed to a small oversupply in some important markets,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. Susannah Streeter, chief investment strategist at Wealth Club, added: “Fears of a long-lasting global energy crunch induced by the Iran conflict are slinking away, with oil prices sinking back towards pre-crisis levels.”
But risks remain. Pratibha Thaker, regional director for the Middle East and Africa at the Economist Intelligence Unit, warned: “Markets are still watching the region closely, and any renewed tensions could quickly send oil higher again.” Hundreds of ships still appear to be waiting in the Gulf, and the number of crossings is still below wartime levels.
Stock markets on both sides of the Atlantic rose on Thursday, with the pan-European Stoxx 600 and the Dow Jones hitting record highs. In the UK, the Bank of England governor, Andrew Bailey, welcomed the easing tensions. Speaking to the Shetland Times, he said: “It does look like a truce has broken out. And what’s interesting is that, particularly this week, there’s quite a sharp fall in energy prices.”
Petrol prices are expected to follow. The RAC said the drop in oil meant unleaded petrol would likely fall below 150p a litre in the coming days, the cheapest in three months, with diesel falling back below 160p. “We urge retailers to pass on the savings they’re benefiting on the wholesale market to drivers straight away,” said RAC spokesperson Simon Williams.
Brent crude for August delivery was trading lower than for September, at $73.59, indicating ample short-term supply. Yet with the strait still far from fully open, the question remains: how quickly will the relief reach the pump?