Washington expects Strait of Hormuz deal by Wednesday, Brent crude drops 5.3% to $79.36
Treasury Secretary Scott Bessent said a deal to reopen the strategic waterway could come 'today or tomorrow,' sending Brent crude to its lowest close since July 10.
Diplomatic push
On Tuesday, 4 August, senior US officials signalled that a deal to reopen the Strait of Hormuz could be imminent. Secretary of State Marco Rubio said there had been "progress" in negotiations with Iran and Oman, whose coastline borders the strait. "No final agreement has yet been reached. We hope it will happen very soon," he added. Treasury Secretary Scott Bessent was more specific, telling CNBC that an accord to reopen the waterway and move toward normalization could be struck "today or tomorrow", meaning Wednesday, 5 August. Qatar, which is mediating alongside Pakistan and Oman, described efforts as "ongoing" to find a "short-term solution that would allow dialogue to resume," according to foreign ministry spokesman Majed al-Ansari. President Donald Trump and Qatar's Emir Sheikh Tamim bin Hamad al-Thani discussed the push by phone, with the Qatari palace saying the call focused on "easing tensions" between Washington and Tehran and "bringing the two parties closer."
Oil prices slide
The diplomatic signals sent crude prices tumbling. Brent crude, the international benchmark for October delivery, fell 5.26% to $79.36 a barrel, its lowest close since 10 July. West Texas Intermediate for September delivery dropped 5.69% to $75.77. The declines reversed modest gains earlier in the session after Bessent's interview aired. At the height of the US-Iran conflict, Brent had surged above $120 a barrel. Andy Lipow of Lipow Oil Associates told AFP that the market was "closely following the negotiations" and hoping for a deal to reopen the strait.
- Brent crude
- -5.26 %
- WTI
- -5.69 %
From truce to renewed conflict
The Strait of Hormuz, a chokepoint for roughly one-fifth of global oil shipments, has been at the centre of a spiralling confrontation. Iran blocked the waterway in late February, and the United States responded with a naval blockade of Iranian ports. A memorandum of understanding signed in June launched a 60-day process aimed at definitively ending the Middle East war and settling a range of issues, with Iran's nuclear programme at the core. The deal allowed maritime traffic to resume and was seen as a significant step forward. But the truce collapsed in early July when hostilities flared again, with US strikes resuming. Iran tightened its control over the strait, and vessels entering without Tehran's permission have been regularly hit. On the night of 3–4 August, a cargo ship attempting the passage was struck by a projectile.
- Iran blocks Strait of Hormuz; US imposes naval blockade on Iranian ports
- Memorandum of understanding signed, launching 60-day peace process; strait reopens to traffic
- Hostilities resume; Iran re-tightens control over the strait, targeting unauthorised vessels
- Cargo ship struck by a projectile while attempting to cross the strait
- US officials express optimism for a deal; oil prices drop sharply
Iran denial and market caution
Despite the US optimism, Iran has denied holding any discussions with Washington. And some analysts remain sceptical. Lipow cautioned that similar announcements and negotiations in the past had rarely produced results.
We have already seen this scenario play out: announcements are made, negotiations may be underway, but they generally do not lead to any solution.
Nevertheless, investors are betting on a repeat of the June accord that briefly reopened the strait, pushing oil prices lower.
