By- Konstantinos Chrysikos Head of Customer Relationship Management at Kudotrade
Oil prices extended their decline on hopes that the reported talks between the US and Iran could lead to a de-escalation in tensions and potentially allow for the reopening of the Strait of Hormuz, a critical chokepoint for global crude flows. Optimism surrounding a possible diplomatic breakthrough has eased supply fears, prompting a pullback in prices after the recent surge.
Despite the softer tone, the Strait of Hormuz remains effectively closed, with tanker traffic still severely restricted, continuing to disrupt global crude shipments and tighten near-term supply conditions. This ongoing constraint could keep the market highly sensitive to geopolitical developments.
Uncertainty surrounding the progress of negotiations, along with conflicting reports regarding the developments of the talks, is likely to fuel caution. In this environment, oil prices could remain volatile, with the risk of another sharp upside move if a diplomatic resolution fails to materialize within the timeframe indicated by the US administration.
The market could decline further if tensions ease in a sustained manner, particularly amid efforts for coordinated releases from strategic petroleum reserves. Such measures would help temporarily offset supply disruptions, provided geopolitical risks in the region abate.
