Oil Prices Decline Amid US Pledge to Assist Vessels Through Strait

Oil Prices Drop After Trump Signals Progress in Talks with Iran

The global oil market experienced a decline in prices after US President Donald Trump announced that the US would begin guiding neutral ships out of the Strait of Hormuz, signaling progress in talks with Iran to end the war that has been ongoing for 10 weeks. This move is set to take effect on Monday, with the aim of freeing up people, companies, and countries that "have done absolutely nothing wrong," Trump stated in a social-media post.

Brent crude oil declined below $108 a barrel, marking a third consecutive day of decline, while West Texas Intermediate was trading near $101. The planned move comes as the US leader also reported that representatives were having "very positive discussions" with Tehran that could lead to a "very positive" outcome, although no further details were provided.

Iran, meanwhile, stated that it was reviewing Washington's response to its recent 14-point plan, according to reports from Iranian TV. The conflict in the region has had a significant impact on the global oil market, with crude prices surging to their highest level since 2022 last week. This rise has been driven by a double blockade of the Strait of Hormuz, with Tehran preventing ships from exiting the Persian Gulf and the US interdicting vessels headed to or from Iranian ports.

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The drop in oil prices is seen as a reaction to the shifting tone in the market, with analysts noting that even rhetorical de-escalation can lead to a reduction in premiums. However, Trump's post also raised the prospect of responding with force if Iran sought to prevent the ships' passage, which could potentially lead to increased tensions.

The US blockade is designed to throttle Iran's economic lifeline and force the shut-in of local oil supply, with Treasury Secretary Scott Bessent stating that well closures may start "in the next week" as the Islamic Republic's storage is filling up. OPEC has agreed to a symbolic rise in June quota levels, seeking to send a business-as-usual message after the exit of the United Arab Emirates.

The war, which erupted in late February after the US and Israel attacked Iran, was cast by Washington as an effort to prevent Tehran from posing a threat due to its nuclear program. So far this year, Brent has surged about 77%.

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