Oil prices fell nearly 7 per cent on Monday as optimism grew that the United States and Iran were moving closer to a peace deal that would reopen the Strait of Hormuz.
Brent crude futures were down by $7.24 or almost 7 per cent to $96.30 a barrel, and the US West Texas Intermediate (WTI) crude futures decreased by $6.30 or 6.5 per cent to trade at $90.88 per barrel.
Comments by President Donald Trump that diplomatic negotiations with Iran are advancing eased market fears of severe energy supply disruptions due to the Middle East conflict.
This is as a top negotiator of Iran, and its foreign minister was in Doha for talks with Qatar’s prime minister on a potential deal with the US to end the three-month-old war
Recently, both countries have downplayed expectations for an immediate peace agreement to end their three-month-old war, backing away from claims of an imminent breakthrough.
President Trump later revealed that he has instructed negotiators not to rush the process, asserting that the US naval blockade on Iranian ports will remain in full effect until a finalised accord is certified and signed.
Also, the US Secretary of State Marco Rubio has affirmed that the US government will exhaust diplomatic channels, also warning that it will handle Iran in “another way” if a good agreement cannot be secured, hinting at a potential return to active war.
The deal outlines a process to fully reopen the vital global shipping lane without tolls, resolving the global energy crunch. Iran would receive targeted sanctions relief and the gradual unfreezing of up to $20 billion to $25 billion in assets currently held in foreign banks.
Even if a peace deal is reached, analysts expect a return to normal oil flows through the strait will take months, while damaged oil and gas facilities are repaired. There is currently a supply shortfall of up to 11 million barrels per day of crude oil that does not go away immediately, even if a deal is reached soon.
Ship-tracking data showed three Liquefied Natural Gas (LNG) tankers passed through the strait in recent days, heading to Pakistan, China and India, as well as a supertanker with Iraqi crude for China after being stranded for nearly three months.
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