Oil Prices Tumble

WTI crude futures tumbled nearly 6% to below $91 a barrel on Monday, as optimism grew that the US and Iran could soon reach an agreement to end the conflict and reopen the Strait of Hormuz. Still, uncertainty remains high, with officials on both sides signaling that key issues are yet to be resolved and continuing to send mixed messages on the progress of negotiations. US President Trump said that “the deal with Iran will either be a great and meaningful one, or there will be no deal,” while an Iranian Foreign Ministry spokesman noted that “a consensus was reached on many of the topics discussed, but no one can claim that the signing of an agreement is imminent”. Despite the lingering uncertainty, ship-tracking data indicated a gradual easing in regional disruptions, with three liquefied natural gas tankers recently passing through the Strait of Hormuz en route to Pakistan, China, and India.

WTI crude futures dropped about 5% toward $91 per barrel on Monday, extending last week’s decline as the US and Iran moved closer to a deal. Reports indicated that the proposed deal could lead to the reopening of the Strait of Hormuz, an end to hostilities, the release of some frozen Iranian assets, and additional talks focused on curbing Tehran’s nuclear program. Still, President Donald Trump stated that Washington would keep its blockade of the Strait of Hormuz in place until a formal agreement is reached, adding that he would not “rush” into a deal. A full reopening of Hormuz would provide significant relief for major Asian economies and could push oil prices substantially lower, considering the waterway carries roughly one-fifth of global oil and LNG shipments. The Iran conflict and the dual blockade of Hormuz have severely disrupted global energy markets, forcing Middle Eastern producers to halt millions of barrels per day in crude output.

Oil fell by more than 5% at the start of the week, with crude oil dropping to $91 a barrel and Brent falling to $98, after both benchmarks had already declined 5% last week as the US and Iran moved closer to a deal. According to MS Now, the proposed deal would reopen the Strait of Hormuz, bring an end to the hostilities, unfreeze some Iranian assets, and pave the way for further negotiations aimed at limiting Tehran’s nuclear program. Still, President Trump said Washington would maintain its blockade of the Strait of Hormuz until an agreement is finalized and he wouldn’t “rush” into a deal.