Brent crude oil prices fell towards $79 a barrel, marking a more than 9% decline for the week, as shipping through the Strait of Hormuz resumed. West Texas Intermediate for August was trading near $76 a barrel. The resumption of tanker movement follows the lifting of restrictions on traffic to and from Iranian ports by the US Central Command.
The decline in crude prices has reversed nearly all gains since the conflict began in February, when the US and Israel launched attacks on Iran over its nuclear program. The Strait of Hormuz, a critical waterway that handles about a fifth of the world’s oil supply, had been affected by blockades from Tehran and Washington.
Kuwait announced plans to increase production, while the Joint Maritime Information Center advised vessels to follow a route closer to Oman’s coastline to mitigate risks from mines. US President Donald Trump welcomed the developments, noting the positive market reaction with oil prices down and stock prices up.
“The Markets are loving what is happening with Oil Prices way down, and Stocks way up.”
Donald Trump, US President
Despite the price drop, the complete reopening of the Strait of Hormuz is expected to be complex, involving coordination of vessel movements, restarting oil wells, repairing infrastructure, and de-mining operations. Some shipowners remain cautious about operating conditions in the strait and the wider Persian Gulf.
Analysts highlight that global oil inventories were depleted during the disruption and will take time to rebuild. The focus is now on how quickly Middle Eastern producers can restore output and exports after wartime disruptions.
Background
The Strait of Hormuz is a vital corridor for global oil supply, typically handling about 20% of the world's oil. The recent disruptions were due to geopolitical tensions involving Iran, the US, and Israel, which had significant implications for global oil markets.
Looking ahead, the market will closely watch the pace of shipping activity returning to normal levels in the Strait of Hormuz. Saudi Aramco CEO Amin Nasser has cautioned that disruptions could delay global oil market stability until 2027, potentially affecting nearly 100 million barrels of oil supply weekly.
