Oil prices swing as Hormuz diplomacy intensifies

Oil prices extended their losing streak on Thursday as a flurry of diplomatic activity involving Iran, Oman, and Qatar raised hopes for a partial reopening of the Strait of Hormuz, the chokepoint through which roughly a fifth of global oil and gas flowed before the U.S.-Israeli war on Iran began in late February.

Brent crude futures fell toward $87 a barrel, marking a fourth consecutive session of declines, while West Texas Intermediate dropped for a fifth straight day. Earlier in the session, Brent dipped as low as $86.22 before recovering some ground as traders weighed the gap between diplomatic optimism and conditions on the water.globalbankingandfinance+1

Qatar's Tehran Visit and the Iran-Oman Deal

Qatar's Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani traveled to Tehran on Thursday to discuss "ways to de-escalate tensions and create the conditions conducive to dialogue," according to Qatar's Foreign Ministry. The visit comes as Iran and Oman work to finalize an agreement on joint management of the strait, including a temporary navigational corridor and mine-clearing operations, after Iran's Revolutionary Guards said the two countries had agreed on a revenue-sharing mechanism for the waterway.bostonglobe+2

The diplomatic push follows a month-long pause in U.S. military strikes on Iran, with Washington shifting toward economic pressure through expanded sanctions and a naval blockade of Iranian ports. U.S. President Donald Trump told Al Jazeera on Wednesday that he has "no time schedule" to wrap up the conflict, which reaches its six-month mark on Friday.oilprice+2

Analysts Urge Caution

Despite the market's reaction, analysts warned that an Iran-Oman arrangement would not automatically restore shipping. "Any agreement between these two parties does not mean we will see normalisation in oil flows through the key chokepoint," ING commodity analysts wrote on Thursday. "We would likely need to see the US lift its blockade on Iranian ports and ease sanctions on Iran before we see any move towards normalization."investing+1

Vessel traffic data underscored the point. Only five commodity ships transited the strait on Tuesday, rising to 10 on Wednesday — still well below the 10-day average of about 15 and far below pre-war levels, according to ship-tracking firm Kpler. Oil flows through the waterway have fallen to roughly one-quarter of their pre-conflict level.english.aawsat+2

Supply Risks Persist

The conflict's toll on global fuel supplies remains evident. U.S. distillate stockpiles, including diesel and heating oil, fell to 103.4 million barrels in the week ended August 21 — the lowest level ever recorded for this time of year, according to the Energy Information Administration. Damage to Middle East refineries and Ukrainian drone strikes on Russian refining capacity have compounded the tightness.finance.yahoo+3

"As long as the risk to supply remains, some degree of war premium can continue to be priced into oil," said Priyanka Sachdeva, head of market insights at Phillip Nova.reuters