Oil prices slid to their lowest level in three months on Tuesday, as traders reacted to growing expectations that the Strait of Hormuz could reopen following a preliminary peace deal between the United States and Iran.
Brent crude, the global benchmark, fell around 4 percent to $79.87 a barrel, slipping below the $80 mark for the first time since early March. US West Texas Intermediate (WTI) dropped 4.5 percent to $77.16 a barrel. Both benchmarks have now declined for four consecutive trading sessions.
The latest drop followed a near 5 percent fall in the previous session after US President Donald Trump announced an interim agreement aimed at ending the US-Israeli conflict with Iran. Full details of the deal have not yet been released, but Iranian Foreign Minister Abbas Araqchi confirmed that Tehran and Washington will begin a new round of negotiations in Switzerland on Friday in an effort to reach a final settlement.
Market sentiment has been shaped by the expectation that the agreement could pave the way for the reopening of the Strait of Hormuz, a critical shipping route that typically carries about one-fifth of global oil supply. The waterway had been effectively closed during the conflict, forcing tanker traffic to reroute or pause operations amid security concerns.
Some vessels have continued to move cautiously along Oman’s coastline in recent weeks, operating under restricted conditions while awaiting clearer safety guarantees. Reports suggest that the US military has played a supporting role in managing oil transport flows during the disruption, including coordinated ship-to-ship transfers and convoy protection measures.
Analysts say the potential reopening of the strait, combined with already soft physical market conditions, has added further downward pressure on prices. Saxo Bank’s Ole Hansen noted that markets are pricing in a faster return of stranded supply, although he warned that tighter inventories and ongoing geopolitical uncertainty could still complicate any return to pre-conflict pricing levels.
Morgan Stanley analysts also pointed to weakening indicators in global oil demand, while Goldman Sachs revised its forecasts downward, citing expectations that Gulf exports could return to normal sooner than previously anticipated.
China’s crude imports fell sharply in May, down 29 percent to their lowest level in eight years, adding to concerns over weakening demand from the world’s largest importer. Analysts also expect Saudi shipments to China to decline further in July.
Market strategist Fawad Razaqzada said softer Chinese data suggests demand weakness is emerging at a time when supply is likely to recover as restrictions ease.
Despite the recent decline, analysts caution that uncertainty remains high, with a lasting truce yet to be secured and the timing of full shipping normalisation still unclear.
