Oil Prices Drop as U.S. Signals Progress on Strait of Hormuz Deal

Oil Futures Slide to Three-Week Lows

Brent oil futures for July delivery declined 5.6% to $97.74 a barrel by 01:09 ET (05:09 GMT), while West Texas Intermediate (WTI) crude futures fell 6.1% to $90.71 a barrel. Both benchmarks retreated to their weakest levels in nearly three weeks.

The move extended last week’s losses, which were driven by growing expectations that a U.S.-Iran agreement on the Strait of Hormuz was nearing. The waterway had been a key source of support for prices after its closure during the Iran war, as it previously handled roughly 20% of global oil supplies.

U.S.–Iran Talks and Mixed Signals on Hormuz

Oil’s latest leg lower followed remarks from U.S. Secretary of State Marco Rubio, who said Washington and Tehran had a “pretty solid” framework deal to reopen the Strait of Hormuz. Rubio also indicated that military action was possible if Iran did not accept an agreement.

His comments came after U.S. President Donald Trump stated over the weekend that the United States was close to finalizing a framework deal with Iran. Reports cited both sides, as well as Pakistani mediators, as signaling progress. However, Iranian state media contradicted Trump’s assertion that a deal was nearly complete.

Trump later emphasized there was no rush to reach an agreement and noted that a naval blockade against Iran would remain in place until a deal was secured. He reiterated that Iran could not be allowed to possess a nuclear weapon and posted several social media messages hinting at potential military action.

Key points of contention between Washington and Tehran remain, particularly over Iran’s nuclear activities and its enriched uranium holdings, which Tehran has largely refused to relinquish.

Limited Traffic Through Hormuz and Timeline Risks

Despite ongoing negotiations, reports on Monday indicated that only a few vessels were passing through the Strait of Hormuz, with traffic still at a fraction of pre-war levels. The closure of the channel has been central to recent oil market dynamics, given its prior role in global supply flows.

Iran was reported to be preparing measures to charge for commercial shipping through the Strait, a move that could intensify frictions with the United States. In addition, any restoration of oil flows through Hormuz is expected to take several months, suggesting a prolonged period of constrained traffic even if a deal is reached.

FAQ

Why did oil prices fall on Monday?
Oil prices declined on Monday due to signs of progress toward a U.S.-Iran framework deal to reopen the Strait of Hormuz, reducing fears of prolonged supply disruption through the key shipping channel.

How much did Brent and WTI futures drop?
Brent futures for July fell 5.6% to $97.74 a barrel, while WTI futures slid 6.1% to $90.71 a barrel by 01:09 ET (05:09 GMT).

What is the current status of the Strait of Hormuz?
Only a few vessels are currently passing through the Strait of Hormuz, and traffic remains far below pre-war levels. Full restoration of oil flows is expected to take several months.

What are the main points of disagreement between the U.S. and Iran?
The United States and Iran remain divided over several key issues, particularly Iran’s nuclear activities and its enriched uranium holdings, which Iran has largely declined to hand over.