Oil prices have declined to levels not seen since the onset of the US-Israel conflict involving Iran, reflecting growing optimism over indirect negotiations aimed at establishing a permanent peace agreement. On Thursday, Brent crude futures for August delivery dropped more than 1 percent to $70.82 per barrel by 04:30 GMT, marking the lowest price since February 27, the day before the hostilities began. This latest decrease brings Brent crude down over 38 percent from its post-conflict peak of above $126 per barrel reached on April 30.
The decline in oil prices coincides with reports from Qatar, a key mediator between Washington and Tehran, indicating “positive progress” in indirect talks addressing unresolved issues within the memorandum of understanding (MoU) concerning the cessation of the conflict. US President Donald Trump also expressed optimism on Wednesday, stating that efforts toward the denuclearization of Iran were advancing well.
Market analysts attribute the price drop to increased oil flows from the Gulf region coupled with a cautiously optimistic geopolitical climate. Vandana Hari, founder of Singapore-based energy consultancy Vanda Insights, noted that although several critical aspects of the MoU remain unsettled, tensions have eased temporarily regarding control of an interim transit regime in the Strait of Hormuz. Hari suggested that oil prices may continue to decline until the current surplus supply is absorbed, potentially entering oversold territory before stabilizing in line with new supply-demand dynamics.
The Strait of Hormuz, a strategic maritime corridor responsible for about one-fifth of global oil and liquefied natural gas trade during peacetime, has seen tentative signs of recovery after a recent drop following attacks on commercial vessels. Data from MarineTraffic showed at least 40 vessel transits on Tuesday, increasing from 27 on Monday and 22 on Sunday. Despite this uptick, daily traffic remains significantly below the pre-war average of roughly 130 crossings, as security concerns persist.
Iran has pledged to use its “best efforts” to ensure safe passage of vessels in the deals outlined on June 17 but continues to assert exclusive authority over navigation through the strait. Since the outbreak of conflict, MarineTraffic has recorded at least 49 attacks on commercial ships in the area, many of which Tehran has either claimed responsibility for or blamed on its forces.
Neil Crosby, an oil market analyst with Sparta Commodities in Singapore, cautioned that the current price retreat reflects only a tentative market belief that hostilities are easing and supply conditions are improving. He emphasized that the situation remains unstable, both politically and in terms of oil market fundamentals such as supply, demand, and trade flows. Crosby added that sustained low prices are likely to encourage global crude buyers to return to the market gradually, mitigating current surpluses over time.