Oil heads for longest losing streak in 10 months as US-Iran deal nears and Strait of Hormuz reopening looms

Price slide extends

Oil prices declined for a fifth consecutive session on Wednesday, pushing benchmarks toward their longest losing run in 10 months. West Texas Intermediate for July delivery traded at $75.42 a barrel on NYMEX, down 0.83 percent, while Brent for August settled at $78.39, a drop of 0.72 percent. The sell-off follows a 4 percent plunge on Tuesday that sent Brent below the $80 mark for the first time since 3 March.

Investors are unwinding a geopolitical risk premium that had been built into crude since late February, when US and Israeli strikes effectively closed the Strait of Hormuz. "Markets are largely pricing out that embedded geopolitical risk premium," said Priyanka Sachdeva, senior market analyst at Phillip Nova.

The interim agreement

President Donald Trump and Pakistani Prime Minister Shehbaz Sharif announced on Sunday that the United States and Iran had reached a preliminary peace deal. The formal signing is scheduled for Friday in Switzerland. Under its terms, Iran will be permitted to resume oil exports and gain access to frozen assets immediately after the accord is inked.

Trump said the next round of talks would be easier than the first, adding that the agreement makes clear Tehran will not develop nuclear weapons. "The most important thing for me is that Iran never acquires a nuclear bomb, and the deal says it loud and clear," he told reporters. The White House confirmed technical nuclear discussions would resume later this week.

Market recalibration

Banks have rushed to revise forecasts. Goldman Sachs now expects Persian Gulf exports to return to pre-war levels by the end of July, a month earlier than previously thought, and cut its fourth-quarter Brent call by $10 to $80 a barrel. Citi lowered its Q4 estimate to $70. Commerzbank remains cautious, projecting Brent will stay around $85 through year-end, warning that a full normalisation of flows will take time.

"While political agreements may be advancing, tanker traffic through the strait has still not returned to normal," noted Phillip Nova’s Sachdeva. Morgan Stanley sees 50 percent of lost production returning by September and 80 percent by December, describing the pact as "a key step toward de-escalation and higher oil exports through the Strait of Hormuz."

Strait timeline and shipping caution

Before the conflict, roughly one-fifth of the world’s oil and LNG transited the narrow waterway. The route has been effectively blocked since 28 February, and a US naval blockade of Iranian ports was imposed in mid-April. Trump ordered the immediate lifting of that blockade on Sunday, and empty tankers have begun approaching the Persian Gulf, a tentative signal of confidence.

Shipowners remain guarded, however. "We are talking about a gradual resumption of activity, not a one-time return to normal," said Parash Jain, global head of transport and logistics research at HSBC Holdings. "The last thing shipping lines want is to spend two months rerouting vessels only to find they need to reroute them back."

WTI is likely to remain volatile, moving in a range of about $10 above or below the $80 level.

US crude inventories fell by 8.3 million barrels in the week to 12 June, API data showed, while China’s oil processing dropped 9.1 percent year-on-year in May, the lowest in nearly four years, as refiners drew on stockpiles during the war. The US Department of Energy reported that strategic petroleum reserves have sunk to their lowest since 1983, adding urgency to the supply restoration.