Oil extended slide, down 5% as US-Iran diplomatic progress stokes Hormuz reopening hopes

Global crude benchmarks fell for a second straight session on Tuesday, dropping more than 5% to fresh three-week lows as signals of diplomatic momentum between Washington and Tehran further eroded geopolitical risk premiums.

International Brent crude dropped $4.41, or 5.3%, to settle at $79.36 a barrel, marking its lowest finish since July 13.

US West Texas Intermediate (WTI) futures plunged $4.57, or 5.7%, to close at $75.77 a barrel.

The sell-off intensified after US and Qatari officials reported progress in Oman-facilitated negotiations aimed at securing safe passage for tankers through the Strait of Hormuz. Comments from US Treasury Secretary Scott Bessent suggesting a potential agreement could be reached imminently prompted traders to rapidly price out supply disruption risks, despite no formal deal being finalized.

However, physical market conditions remain starkly disconnected from paper market sentiment. Vessel traffic through the Strait of Hormuz and the Bab el-Mandeb Strait remained virtually unchanged at severely depressed levels, leaving physical export bottlenecks intact even as financial markets price in a diplomatic resolution.

Written by: Aiman Haikal