Oil prices fell 11% in two days in anticipation of the unblocking of the Strait of Hormuz

News of negotiations between the US, Iran and Oman and the possible signing today of an agreement to unblock the Strait of Hormuz has sent oil prices crashing by 11% since Monday.

 

Yesterday, October Brent crude futures fell 6.3% to $79/barrel (-11.4% in two days, +9.7% in the month).

 

The American news website Axios reports that the United States, Iran and Oman are close to concluding a "temporary" agreement to reopen the Strait of Hormuz, which would take into account some of Iran's demands for control over traffic through the strait.

 

The agreement provides for:

• 60-day interim agreement between Oman and Iran,
• incoming vessels use the northern corridor through Iranian waters,
• Outgoing vessels use the southern corridor through Omani waters,
• no tolls or fees are charged for 60 days,
• The middle lane should be cleared within 30 days, and then it will be used for both directions.

 

Yesterday, US President Trump said the US was ready to launch its "biggest attack" on Iran since World War II, but Iran has invited talks. Trump says the Strait of Hormuz will open "very soon" or Iran will "be hit very hard."

 

According to Vortexa, crude oil volumes on tankers that have been idle for at least 7 days rose by 4.6% to 112.1 million barrels in the week of July 25-31, which also adds to the pressure on prices.

 

Iran has realized that blocking the Strait of Hormuz, as well as the Bab el-Mandeb Strait in the Red Sea with the help of the Yemeni Hussites, remains the most influential lever of pressure on the United States, so we should not expect the normalization of Middle Eastern exports to pre-war levels.

 

The Yemeni Ministry of Transport reported that yesterday, the Houthis used a boat laden with explosives to attack an Indian ship heading to the port of Mokha, causing the ship to sink, but the Yemeni navy rescued its entire crew. Last week, the Houthis attacked a Saudi tanker in the Red Sea. This indicates that Iran, through its proxies, will be able to influence the movement of ships through the Bab el-Mandeb Strait in the Red Sea.

 

Reducing tensions in the Middle East will allow for 1-2 months to stabilize oil prices at $75-80/barrel and restore oil supplies from Iran, which will give it funds to restore its economy, but if the Ayatollah regime retains power, the war with the United States will resume.