Oil Prices Plunge 5% as US-Iran Ceasefire Fuels Peace Hopes

By Adedapo Adesanya

Oil prices dropped about 5 per cent on Tuesday as hopes increased that the pause in fighting ‌between the United States and Iran will lead to talks to end the war.

Brent futures fell by $4.27 or 5.3 per cent to $83.70 a barrel, while the US West Texas Intermediate (WTI) crude declined by $3.35 or 4.4 per cent to $79.26 per barrel.

After dropping about 16 per cent over three days, Brent closed at its lowest since July 13 and WTI at its lowest since July 16.

Although both sides have stopped attacking each other, they remain far from resolving the differences that led to the effective closure of the Strait of Hormuz, which, before the war, handled the transit of about one-fifth of global oil supplies.

Iran has also denied seeking to resume talks with the US, contradicting claims by US President Donald Trump that “good talks” are underway. Trump has made similar assertions on several occasions, often alongside threats to launch fresh strikes, but Iranian officials have remained firm in rejecting those claims.

According to Reuters, Oman presented Iran with a Gulf-backed proposal to manage the Strait of Hormuz, including the introduction of voluntary transit fees for vessels using the strategic waterway. The proposal was intended to provide a framework for restoring trade through the strait, which was severely disrupted by the conflict.

Iran, however, rejected the Omani plan and proposed to Oman a temporary arrangement to reopen the Strait of Hormuz under which one direction of traffic would pass through Iranian waters and part of the opposite route would also be in Iranian waters.

Meanwhile, Saudi Aramco shut down its 400,000-barrel-per-day Jizan oil refinery in Saudi Arabia on July 27 following an attack by the Houthis on Saturday.

The Houthis have disrupted shipping through the Bab el-Mandeb Strait linking the Red Sea to the Gulf of Aden, creating a second chokepoint for oil flows.

The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) is preparing to approve one more production increase for September and then put the monthly quota parade on hold through the end of the year

Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman are expected to raise their combined September target by about 188,000 barrels per day when they meet on August 2, sources told Reuters.

That would match the increases announced for June, July, and August and complete the return of a 1.65-million-bpd voluntary cut agreed in 2023, adjusted for the UAE’s departure from OPEC in May. Then OPEC+ appears ready to stop.