• Oil prices extended losses after signals of progress toward a US-Iran deal and potential reopening of the Strait of Hormuz, easing supply concerns.
  • The milestone comments from senior US officials contributed to reduced geopolitical risk premiums in crude markets.
  • Traders now focus on verifiable steps toward a final agreement, with near-term price direction hinging on tangible outcomes.

Prices Slide on Diplomatic Hopes

Oil prices fell for a second straight session on Thursday after the US Vice President said the Strait of Hormuz is open and that the US and Iran have laid a "very good foundation" for a successful final deal. Brent crude dropped 2.3% to $72.15 a barrel, while West Texas Intermediate slid 2.5% to $68.40, as traders interpreted the remarks as reducing the risk of supply disruption.

The Strait of Hormuz, a critical chokepoint through which about 20% of global oil passes, has been a focal point for geopolitical risk premiums. Any easing of disruption risks there tends to compress those premiums, even as other factors like global demand and OPEC+ policy continue to influence prices.

"The market is pricing in a lower probability of a supply shock," said a senior analyst at a commodities trading firm. "But we need to see concrete steps, not just words."

The comments come amid ongoing talks between the US and Iran aimed at stabilizing relations and addressing regional tensions. People familiar with the matter say negotiators are making progress on key issues, though substantial details remain pending. A deal could alter sanctions posture and potentially bring more Iranian oil to market, further weighing on prices.

Market Reaction and Outlook

The price decline was broad-based, with gasoline and diesel futures also dropping. Energy stocks followed suit, with the S&P 500 energy sector down 1.8%.

"The risk premium built into crude is unwinding," said a portfolio manager at a hedge fund. "If we see a verifiable agreement and Hormuz remains open, prices could slip further. But any escalation could reverse these moves quickly."

Short-term, traders are watching for concrete milestones — such as timetables for Hormuz reopening or verification mechanisms — to reassess positions. Longer-term, the durability of any deal and the true easing of supply constraints will be decisive, alongside structural factors like global demand trends and OPEC+ output decisions.

Industry Response

Oil majors and trading houses have been adjusting portfolios in response to the evolving risk assessment. Some are hedging against a potential price rally if talks stall, while others are positioning for lower prices on a deal.

"We are cautiously optimistic," said a senior executive at a European oil company. "But we have seen false dawns before."

Attempts to reach the White House for comment were not immediately returned.

Correction: An earlier version of this article misstated the percentage drop in Brent crude. It has been corrected to 2.3%.