- Oil drops more than 5 per cent amid diplomatic signals
- Iran allows limited passage through Strait of Hormuz
- Markets remain cautious as conflict continues
Oil prices pulled back sharply after fresh signals from the US suggested possible progress in talks to end the conflict involving Iran. Brent crude dropped around 5 per cent to £74.16 a barrel ($99.29), while US-traded oil fell more than 5.5 per cent.
The shift comes as investors try to read between the lines of conflicting claims. US President Donald Trump said negotiations were already under way and suggested both sides were eager for a deal, as quoted in a news report. But officials in Tehran have pushed back, calling such claims “fake news” and questioning the credibility of US diplomacy.
Still, even the hint of talks appears to have been enough to cool fears in the oil market, at least for now.
Strait of Hormuz offers a narrow opening
Adding to the cautious optimism, Iran indicated that “non-hostile” vessels could pass through the Strait of Hormuz, a key global oil route. The country’s UN mission said ships would be allowed safe passage if they comply with Iranian regulations and avoid supporting actions against Iran.
That matters because roughly 20 per cent of the world’s oil and liquefied natural gas flows through this narrow waterway. Any disruption here tends to send prices soaring.
There are also reports — not independently verified — suggesting the US has presented Iran with a multi-point proposal, including reopening the Strait and easing sanctions. According to media reports, the plan could involve recognising the route as a free maritime zone.
For now, though, much of this remains uncertain.
War continues, but markets look ahead
Despite the dip in oil prices, the conflict itself shows no clear signs of stopping. Iran and Israel continue to exchange strikes across the region, with fresh attacks reported in Tehran and warnings issued in parts of Lebanon.
Markets across Asia-Pacific reacted positively, with major indices in Japan, South Korea and Australia rising by over 1–2 per cent. These economies are particularly sensitive to oil supply disruptions.
Analysts suggest the recent drop in oil prices reflects a belief that worst-case supply scenarios may not materialise immediately. But that confidence is fragile. As one market expert reportedly said, any sustained decline would depend on “credible follow-through” — such as consistent safe passage through the Gulf.
The broader concern hasn’t gone away. Industry leaders have warned that if oil climbs towards £112 ($150) a barrel, it could trigger a global recession. For now, prices remain elevated compared to pre-conflict levels, and the situation continues to evolve.
In short, the market may be breathing a little easier — but it is far from relaxed.
