Oil dives as Iran keeps Hormuz open and deal hopes rise

Oil prices tumbled on Friday after Iran said commercial vessels could continue passing through the Strait of Hormuz during the remaining ceasefire period, easing fears of a prolonged supply shock in one of the world’s most critical energy corridors.

Brent crude settled down US$9.01, or 9.07%, at US$90.38 a barrel, after sliding as low as US$86.09 during the session. US West Texas Intermediate fell US$10.48, or 11.45%, to US$83.85 a barrel, having earlier dropped to US$80.56. Both benchmarks recorded their steepest one-day falls since April 8.

The sharp retreat reflected a rapid unwinding of the geopolitical risk premium that had driven oil higher over the past two weeks. Markets shifted focus from fears of disruption to signs that crude flows could begin normalising.

A senior Iranian official said all ships could pass through the Strait of Hormuz, although movements would still need to be coordinated with Iran’s Islamic Revolutionary Guard Corps. Ship-tracking data showed around 20 vessels moving from the Gulf towards the exit of the strait.

The price decline was also fuelled by signs of diplomatic progress. Washington and Tehran were reported to have advanced negotiations on a three-page memorandum of understanding aimed at ending the war, while Donald Trump said he believed an agreement with Iran could be reached soon.

The US president also said Tehran had offered not to possess nuclear weapons for more than 20 years, describing talks as close to a breakthrough. In a separate development, hopes of a wider de-escalation grew after a 10-day ceasefire between Lebanon and Israel.

Even so, the broader security picture remained fragile. A US official said a military blockade of Iran involving more than 10,000 personnel was still in effect, underlining that tensions in the region have not disappeared.

Analysts warned that, despite the reopening of Hormuz, physical tightness in the oil market would not ease immediately. It takes about 21 days for cargoes from the Gulf to reach Rotterdam, Europe’s main crude import hub, meaning supply relief for Europe may take time to materialise.

There is also concern that any renewed breakdown in talks over Iran’s nuclear ambitions or US sanctions could quickly put the strait at risk again, reviving fears of another major disruption.

The latest market swings came as fresh estimates highlighted the scale of the damage already inflicted on global energy supplies during nearly 50 days of war. More than 500 million barrels of crude and condensate have been removed from the market since the conflict began at the end of February, according to Kpler data cited in the report.

That lost volume is equivalent to almost a month of US oil demand, more than a month of Europe’s consumption, roughly six years of fuel use by the US military, or enough fuel to power international shipping for about four months.

Gulf Arab producers were estimated to have lost around 8 million barrels per day of crude output in March. Jet fuel exports from Saudi Arabia, Qatar, the United Arab Emirates, Kuwait, Bahrain and Oman also fell sharply, from about 19.6 million barrels in February to just 4.1 million barrels combined in March and April so far.

With crude averaging around US$100 a barrel during the conflict, analysts estimate the missing output has wiped out around US$50 billion in revenue.

Although the reopening of Hormuz has offered some immediate relief, recovery across the region is expected to be gradual. Global onshore crude inventories have already fallen by about 45 million barrels in April, while production outages since late March have reached roughly 12 million barrels per day.

Heavier crude fields in Kuwait and Iraq may need four to five months to return to normal operating levels, and longer-term damage to refining capacity and Qatar’s Ras Laffan LNG complex could leave parts of the region’s energy infrastructure needing years to fully recover.