Oil plunges following hopes of some Middle East de-escalation
Brent crude’s price has moved lower as market participants focus on signs of a potential de-escalation in the Middle East war.
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Oil prices have come under pressure after US President Donald Trump claimed Washington and Tehran engaged in talks.
The price drop comes right after a volatile start to the week, after Trump threatened to target Tehran’s power plants – if the Iranian military keeps the Strait of Hormuz blocked.
While the claim remains unverified, analysts say any progress towards a deal could help ease the supply disruptions that have unsettled the market.
“The comments [by Trump] marked a sharp shift in tone after days of escalating tensions,” two analysts from ING Bank said.
Moreover, Iran has notified the United Nations Security Council (UNSC) and the International Maritime Organization (IMO) that “non-hostile” vessels are allowed to transit the Strait of Hormuz, as long as they coordinate with Iranian authorities, Reuters reported.
Washington has put forward a 15-point ceasefire plan to Iran that could open the door to a month-long truce, the New York Times reported. Tehran, however, has dismissed claims that any direct negotiations with the US are underway.
Despite the pullback, Brent crude is hovering around $100/bbl as geopolitical risks remain elevated, while tight supply conditions continue to strain the physical market, according to analysts.
The US Department of Defense is preparing to deploy more military units to the Middle East, as Israeli officials warn of a possible escalation with Lebanon-based Hezbollah militant group, including a ground incursion into southern Lebanon, the Financial Times reported.
“Bottomline: Strait of Hormuz remains closed; fuel supply crunch grows in Asia,” VANDA Insights’ founder Vandana Hari wrote.
By Aparupa Mazumder
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