Oil prices slid below the psychologically significant $100 mark on Thursday, driven by mounting expectations that a partial agreement between the United States and Iran could unlock the strategic Strait of Hormuz, easing supply concerns tied to the Middle East conflict. Brent crude, the global benchmark, fell $1.95, or 1.93%, to settle at $99.32 per barrel as of 0912 GMT. US West Texas Intermediate (WTI) crude declined by $1.93, or 2.0%, to $93.15 per barrel. Both benchmarks had already plunged more than 7% in the previous session.
The Strait of Hormuz is a critical chokepoint for global oil flows. According to the US Energy Information Administration, approximately 20 million barrels of oil—roughly one-fifth of the world's petroleum liquids consumption—passed through the strait daily in 2024. The waterway's strategic importance means that any disruption can have outsized effects on supply, and there are few viable alternative routes for the vast majority of that volume.
The easing of geopolitical tensions helped temper broader inflation concerns. Brent crude hovered near $99, marking its third consecutive daily decline, while global bonds rallied and the US dollar weakened. US equity futures remained positive, following the S&P 500's consecutive record closes.
According to sources and officials cited by Reuters, the US and Iran are nearing a short-term agreement that would halt hostilities and address the Hormuz flashpoint. The draft proposal reportedly includes a ceasefire and a 30-day window for broader negotiations. However, the contentious issue of Iran's nuclear program would remain unresolved for now. President Donald Trump described a deal as 'very possible' after what he called 'very good talks.' In Tehran, Iranian foreign ministry spokesman Esmaeil Baqaei said the US offer is 'under review' and that Iran will deliver its response via mediator Pakistan once a final position is reached.
The market remains highly sensitive to headline risk. Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that oil has been caught between 'diplomacy and disruption' for over two months. 'The outlook beyond that remains uncertain,' added Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment. The market appears to be pricing in a smoother resolution than the actual negotiations have produced so far. If talks collapse or if there are renewed attacks on oil infrastructure or tankers, crude prices could rebound just as quickly as they have fallen. Sachdeva warned that while a formal agreement might strip out the geopolitical premium, any new flare-up could push prices sharply higher again.
Physical supply conditions remain tight. The EIA reported that US commercial crude inventories fell by 2.3 million barrels last week to 457.2 million barrels. Gasoline stocks declined by 2.5 million barrels, and distillate inventories—covering diesel and heating oil—slipped by 1.3 million barrels. Andy Lipow, president of Lipow Oil Associates, pointed to 'continued liquidation' of crude and refined product stocks as US barrels head overseas to fill supply gaps from Middle East turmoil. According to Reuters, distillate exports hit a record 1.9 million barrels per day last week.
Major oil companies reported mixed quarterly results. Shell posted first-quarter adjusted earnings of $6.92 billion and raised its dividend, though it trimmed buybacks. Shell shares fell 2% along with other energy majors as crude prices slid. According to Reuters, BP and TotalEnergies benefited from robust trading, though the numbers reflected market volatility rather than a surge in demand.
Phil Flynn, senior analyst at Price Futures Group, noted that hopes are rising for a reopening of Hormuz—even if a formal peace deal remains elusive. However, Paola Rodriguez-Masiu of Rystad Energy cautioned that a truce on paper does not translate into tankers docking at refineries overnight. She estimates the real timeline for flow normalization at six to eight weeks.
