Crude oil futures extended their decline on Wednesday as traders grew optimistic about a potential agreement between Iran and Oman to safeguard shipping through the Strait of Hormuz, amid easing concerns over military conflict in the Gulf region.
International benchmark Brent crude for October delivery fell 2.93% to $85.99 per barrel, while U.S. West Texas Intermediate (WTI) crude for October dropped 2.78% to $80.07 per barrel.
Where the market stands now
Market Director at AJ Bell, Dan Coatsworth, noted that U.S. sanctions against Iran have proven less stringent than market participants had anticipated. He added that the pullback in oil prices, combined with government bond yields retreating from recent peaks, has contributed to a modest improvement in overall market sentiment.
Paul Brocaldo, CEO of BankPro, observed that while the United States has not ruled out other forms of intervention, the reduced risk of military confrontation has lowered the market's assessment of supply risks from the Gulf region. Brocaldo also highlighted that Pakistan has made notable progress in negotiations aimed at de-escalating tensions and restoring safe passage through the strait.
What could come next
In parallel, Iran and Oman are in discussions to establish a temporary joint shipping corridor through the Strait of Hormuz, along with mine-clearing operations, as a precursor to a permanent governance framework for the waterway. Oman's Foreign Minister stated on social media platform X that "the future management of the strait and permanent solutions will be implemented at an appropriate time," adding that consultations with regional partners will continue to promote peaceful cooperation, regional stability, and freedom of navigation.
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