WTI Drops Below $81.00 as Iran-Oman Talks Boost Hopes for Reopening Strait of Hormuz

WTI crude futures traded near $81.21 in early European trading on Thursday, extending recent weakness. Market optimism over diplomatic efforts between the U.S., Iran, and Oman to reopen the Strait of Hormuz has significantly eroded the geopolitical risk premium that had previously supported oil prices.

**Talks Heat Up, Supply Disruption Fears Ease**

U.S. Secretary of State Marco Rubio said earlier that negotiations between Washington and Tehran on increasing vessel traffic through the strait have made progress, though a final deal has yet to be sealed. Treasury Secretary Scott Bessent offered a more optimistic timeline, suggesting an agreement could be reached as soon as Tuesday or Wednesday. According to market sources, a draft memorandum of understanding would see Iran clear mines from the strait and restore free passage for ships, while the U.S. would phase out some sanctions and pull back part of its military forces. XS.com head of business development Simon-Peter Massabni noted that expectations of a diplomatic resolution are steadily erasing the risk premium priced in from prior military actions.

**Oil Prices Retreat, but Supply Recovery Still Takes Time**

Crude prices took a sharp hit earlier this week on the back of the talks, with Brent falling below the $80-per-barrel mark and WTI dropping to a three-week low near $75. Although prices have since rebounded somewhat, they remain at recent lows. Still, some analysts caution that damaged oil infrastructure in the Middle East cannot be fully restored in the short term, meaning even an immediate reopening of the Strait of Hormuz would not quickly return prices to pre-escalation levels.

**Market Awaits Further Negotiation Details**

The market's focus now rests on whether the talks can culminate in a formal agreement. Qatar has also indicated that efforts to end the conflict through diplomatic channels are ongoing. Should the negotiations yield substantive progress, the geopolitical risk premium in crude prices could see further downside.