Oil Prices Slide as Iran, Oman Advance Hormuz Shipping Deal Talks

Oil prices extended their decline on Wednesday as Iran and Oman advanced plans for a temporary shipping corridor through the Strait of Hormuz, a critical chokepoint that has been largely shut since the U.S.-Iran war began in late February.

Brent crude futures settled down 74 cents, or 0.84%, to $87.84 a barrel, according to Reuters. West Texas Intermediate crude settled down 13 cents, or 0.16%, at $82.23. During the session, both benchmarks fell to their lowest levels since Aug. 10 on hopes of increased traffic through the strait, but pared losses after official data showed U.S. crude inventories rose less than expected.

Despite the recent pullback, crude remains more than 40% higher this year as the conflict continues to disrupt energy flows from the Persian Gulf.

**Talks on a Temporary Corridor**

Iranian Foreign Minister Abbas Araghchi and Omani Foreign Minister Badr Albusaidi discussed an "interim framework" for a temporary joint maritime corridor, according to a statement carried by Oman News Agency as reported by multiple outlets. Iranian Deputy Foreign Minister Kazem Gharibabadi was cited by semi-official Tasnim news agency as saying the two countries had agreed on a temporary route and intend to negotiate a permanent corridor within 30 to 60 days, according to reports from Zero Hedge and NDTV Profit.

Iran and Oman said on Tuesday they had discussed "a joint temporary navigational corridor" through the strait and agreed to clear the waterway of mines, the American Conservative and News18 reported.

"The market has moved from pricing a high probability of prolonged disruption and renewed escalation towards pricing partial reopening, negotiated shipping arrangements and a lower risk of renewed military confrontation," Saxo Bank head of commodity strategy Ole Hansen told Reuters.

**Strait Traffic Remains Severely Restricted**

Only five commodity vessels transited the strait on Tuesday, according to preliminary data from ship tracker Kpler. That is down from a 10-day average of 15 and well below pre-war levels when the waterway carried about one-fifth of global oil and gas supplies, several sources reported.

**Supply Signals and Geopolitical Moves**

Signs that regional producers expect tensions to ease emerged earlier this week. Satellite imagery showed seven tankers collecting Iraqi cargoes from Persian Gulf export terminals, with a combined carrying capacity of roughly 13 million barrels, Zero Hedge reported, citing Bloomberg. Maritime research firm TankerTrackers reported at least 15 sets of ship-to-ship transfer sessions in the Gulf of Oman involving 25 million barrels of crude oil from nearly every country in the region except Iran.

The U.S. has also started sending personnel back to some diplomatic missions in the Middle East that had been evacuated or downsized amid tensions with Iran, News18 reported, citing the move as a sign Washington sees a lower risk of further escalation.

However, risks remain. An oil tanker was struck by an unidentified projectile on Tuesday near the entrance to the strait, according to the United Kingdom Maritime Trade Operations as reported by News18. Russia’s fourth-largest oil refinery, NORSI, suspended crude processing after a Ukrainian drone attack, Reuters reported.

**Economic Pressure and Diplomacy**

The White House is using economic pressure to push for a reopening of the strait. Treasury Secretary Scott Bessent announced "Operation Economic Outcast" to isolate Iran by punishing its trading partners, the American Conservative reported. However, the U.S. stopped short of imposing secondary sanctions on major trading partners including China, the biggest buyer of Iranian crude, according to NDTV Profit.

China objected to the campaign, with a Foreign Ministry spokesman saying on Tuesday that "cooperation between China and Iran has always been conducted within the framework of international law and should not be interfered with or disrupted," as reported by the American Conservative.

Diplomatic efforts are continuing. Pakistan and Iran made "significant progress" in talks, Pakistan's interior minister said, according to Reuters. Qatari Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani is scheduled to visit Tehran on Thursday to discuss de-escalation.

**Market Impact Beyond Oil**

Falling crude prices provided a boost to equity markets in oil-importing countries. In India, the Gift Nifty futures index rose 81 points, signaling a gap-up opening for domestic equities, News18 reported. "Crude oil has emerged as the key positive catalyst," said Ponmudi R, CEO of Enrich Money, as quoted by News18. "A sustained decline in oil prices can ease pressure on inflation, the current account and corporate costs."

**Caution Remains**

Analysts warned the tentative agreement is far from durable. "An interim framework should not be mistaken for a durable normalization of regional tanker transits," Zero Hedge noted, pointing out that previous de-escalation efforts have repeatedly broken down into drone attacks and military tit-for-tat campaigns. "Until a permanent and enforceable shipping deal is set in stone, the Hormuz risk premium is likely to remain embedded across crude and refined-product markets."