Oil prices slip as Iran-Oman Hormuz deal raises hopes

Oil prices edged lower on Thursday as investors weighed whether progress in Iran-Oman negotiations could lead to a broader U.S.-Iran peace deal and the reopening of the Strait of Hormuz, the critical waterway through which a fifth of the world's oil flowed before the conflict began in February.

Brent crude futures fell 0.5% to $79.08 a barrel, while U.S. West Texas Intermediate futures declined 0.7% to $74.69, according to CNBC. The declines brought prices back toward levels last seen when the U.S. and Iran signed an interim peace agreement on June 17.cnbc

The Proposed Deal

A proposed agreement between Iran and Oman would give Tehran control over ships entering the Gulf through the Strait of Hormuz, a senior Iranian source and two regional officials told Reuters. The arrangement represents one of the biggest concessions yet to Iran in the five-month conflict.cnbc

"Iran said it reached an agreement with Oman on a proposed route for shipping through the waterway, however, the details are still to be ironed out," ANZ Research analysts noted, adding that both inbound and outbound routes would run through Iranian territorial waters at the northern part of the strait.wsj

There was no immediate U.S. comment on the proposal. While President Donald Trump has said a deal reopening the strait is imminent, U.S. officials have repeatedly insisted they would never agree to Iran controlling access to the world's most important energy trade route.cnbc

Caution Amid Optimism

Despite the diplomatic progress, analysts warned that optimism may be premature. Reuters columnist Ron Bousso argued that the market's bet on a deal is "even less justified" than it was before the largely failed mid-June ceasefire, noting that Iran's hand has strengthened, global refining capacity has shrunk, and inventories have been depleted.reuters

The emergence of the Red Sea as a second chokepoint further complicates the picture. Yemen's Iran-aligned Houthis said Wednesday they had launched missile attacks on Saudi oil tankers off the Red Sea port city of Yanbu and in the Gulf of Aden. "Concerns that Houthi attacks could hit Red Sea shipping were limiting optimism about the outlook for an end to shipping disruptions," said Yuki Takashima, economist at Nomura Securities.cnbc

Broader Market Reaction

Currency markets drifted, with the dollar index hovering near a six-week low at 99.65 as traders awaited Friday's U.S. payroll data. The pan-European STOXX 600 hit an intraday record high, up 0.5%, buoyed by strong corporate earnings and hopes for a Middle East resolution.finance.yahoo+1

"Markets have seen plenty of false dawns throughout this conflict," said Deutsche Bank ↗ 1.14% analysts led by Jim Reid, noting that attention is shifting from whether an agreement can be reached to what the final arrangements will look like.finance.yahoo