Oil drops as Iran offers to reopen Strait of Hormuz

Oil prices fell on Tuesday after reports emerged that Iran had offered to reopen the Strait of Hormuz within seven days, conditional on the United States taking initial steps to reduce military pressure. The proposal, first reported by Kyodo News, sent Brent crude below $100 a barrel and eased some of the supply fears that have gripped energy markets for weeks.globalbankingandfinance+1

The offer, outlined by a senior Iranian government official to Kyodo, was reportedly passed to Washington through intermediaries. Tehran is also seeking broader negotiations to bring hostilities with the US to a permanent end.kaohooninternational

Diplomatic Maneuvering at the UN

The report landed as Iranian President Masoud Pezeshkian prepared to travel to New York for the United Nations General Assembly, where potential US-Iran talks could take shape on the sidelines. President Donald Trump said over the weekend he would be open to meeting Pezeshkian, even as the two countries exchanged threats on Sunday. The US envoy to the United Nations said Washington remained willing to negotiate, provided Tehran participated in good faith.reuters+1

Iran also conveyed its conditions to mediators for re-engaging in negotiations, Al Jazeera reported, citing Iran's security chief Mohsen Rezaei. Still, previous diplomatic efforts have made only halting progress, leaving investors cautious about pricing in a lasting resolution.globalbankingandfinance+1

Market Reaction Across Oil and Currencies

Brent crude fell roughly 1% to $99.36 a barrel, while West Texas Intermediate dropped 1.14% to $94.69, according to Kaohoon International. Tim Waterer, chief market analyst at KCM Trade, told Reuters the earlier session's modest gains had "the appearance of a typical short-covering bounce after the recent decline, rather than a fundamental shift."reuters+1

The decline rippled into currency markets. The British pound traded flat just off a two-month low against the dollar at $1.3366, as traders weighed whether a sustained resumption of oil flows through the strait could ease pressure on the Bank of England to raise rates. Goldman Sachs ↘ 1.38% analysts noted that "the bar to out-hawk broader market pricing appears to us to be particularly high," while strategists at Gramercy warned that the BoE "stands alone among major central banks in holding while inflation accelerates."globalbankingandfinance

Broader Supply Risks Persist

Even as the Hormuz proposal offered a glimmer of relief, broader supply risks remained. Yemen's Houthi forces said they attacked Riyadh and a Saudi Aramco facility in Yanbu, stepping up efforts to disrupt Saudi operations. Aramco has increased exports through the Strait of Hormuz after attacks on its East-West Pipeline forced it to halt some shipments, loading roughly 14 million barrels of crude onto seven supertankers inside the Gulf on Sunday. In North Africa, Libya's National Oil Corp said the Sharara oilfield had seen a partial production reduction.reuters