During Asian trading on Thursday, Brent crude oil futures were trading in a narrow range near a low of $79.50 per barrel.
The oil price has found some support at current levels. The gap between optimistic market expectations for the reopening of the Strait of Hormuz and the actual progress, combined with ongoing disagreements between Iran and the US, is causing the price to fluctuate between diplomatic optimism and real-world resistance.
Expectations for the Strait of Hormuz to reopen are growing, giving oil a breather after the recent sell-off, but downward pressure hasn't completely disappeared. While the market's anticipation of the strait's reopening is still weighing on prices, Iranian Foreign Ministry Spokesman Baghaei stated that Iran and Oman are close to finalizing a navigation management framework. This contrasts with former President Trump's optimistic call for an immediate, complete, and total opening, creating a tug-of-war in the oil market. According to a senior Gulf official, there is a 50% chance of a deal being reached by Friday, with the uncertainty itself providing some support for prices. Bulls and bears have tentatively found a balance near the $74 level, awaiting the final outcome of the agreement.
Agreement Framework and Disagreements: Iran Seeks Toll Mechanism, US Opposes
Reports indicate that Iran is pushing to introduce a joint toll collection mechanism in the Strait of Hormuz. Financial markets will closely watch the reactions of leaders from relevant countries, especially those who have consistently supported freedom of navigation in the strait. The US has previously condemned Iran's attempts to seek recognition of its jurisdiction near the waterway. If an agreement grants Iran control or the right to levy tolls on passing ships, it would mean Iran has gained partial jurisdiction over the world's most important energy transit route without direct military conflict. This would be a significant strategic achievement for Iran in this conflict and a major concession by the US. However, the US has repeatedly stated it will not accept Iranian control of the waterway, creating a clear tension between Trump's latest stance and previous official positions.
Market Awaits Global Reaction and Agreement Details
The market is currently paying close attention to the reactions of stakeholders to a potential Strait of Hormuz agreement. Any official statement could influence the short-term direction of oil prices. If the agreement is widely accepted, oil prices could come under further pressure. If relevant countries raise objections or conditions, it could provide short-term support for prices. Furthermore, the specific details of the agreement, including the toll mechanism, control division, and implementation timeline, will be key factors for the market to price in.
Institutional Views
Goldman Sachs stated in its latest report that Brent crude is expected to trade in a range around $80 per barrel until a clear nuclear deal is reached between the US and Iran or until the conflict escalates significantly. Goldman estimates the spot fair value at around $80, meaning the market is only pricing in a modest risk premium. Global visible inventories have been declining by 6.3 million barrels per day over the past two weeks, and Gulf exports have only recovered to 36% of pre-conflict levels. Goldman Sachs noted that if the Strait of Hormuz disruption continues, prices could move significantly higher, but there is downside risk if supply normalizes quickly. Bank of America expects Brent to average around $77.50 in 2026 and fall to around $65 in 2027. The bank believes that disruptions to Middle East supply will be gradually resolved, and the pre-conflict surplus will re-emerge, putting sustained downward pressure on prices. As Gulf production recovers and global inventories build, the oil market will shift from a balanced state to a clear surplus.
Summary
Market expectations for the imminent reopening of the Strait of Hormuz continue to rise. Iran and Oman are close to finalizing a navigation management framework, with Iran pushing for a joint toll mechanism. However, the US has previously made its opposition to Iranian control of the waterway clear. A senior Gulf official puts the chance of a deal by Friday at 50%, creating tension between Trump's optimistic statements and earlier official positions. The market is closely watching the situation in the Middle East, as any related statement could influence the short-term direction of oil prices. If the agreement is widely accepted, oil prices could seek further support to the downside. If it faces resistance or conditional restrictions, it could provide short-term upward momentum for prices. Against a backdrop of fluctuating geopolitical signals, a high-volatility environment for oil prices is expected to persist. The actual content of a Strait of Hormuz agreement and the global reaction will be the key variables determining the next direction for oil prices.
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