Oil prices have seen a notable decline, with Brent crude futures dropping over 7% last week to around $83 a barrel, despite earlier surges above $100. The anticipated reopening of the Strait of Hormuz, a critical shipping route for oil, is now uncertain as Tehran insists on specific conditions before any agreement can be reached with Washington.
President Trump has indicated a shift towards economic pressure rather than military action, which may influence market sentiment. Analysts like Modupe Adegbembo from Jefferies express cautious optimism about a potential agreement, though they warn that if the current deadlock continues, oil prices may not remain stable.
Kieran Tompkins from Capital Economics highlights that the current low prices reflect conflicting market expectations regarding the resumption of energy flows versus a prolonged closure. He suggests that if the situation does not improve, oil prices could rise significantly, potentially reaching $120-140 per barrel by Q4.
Additionally, Amrita Sen from Energy Aspects notes that while alternative export routes and reduced demand have temporarily cushioned the market, the recovery of Chinese crude imports could lead to upward pressure on prices.
Overall, the market is reacting to the possibility of a deal while grappling with ongoing supply constraints, including geopolitical tensions and infrastructure attacks in Saudi Arabia