Oil Prices Rise on Report Iran Rejects US Proposal for Strait of Hormuz

Oil Prices Swing Amid Volatile Trading as US-Iran Conflict Eases

Oil prices experienced significant fluctuations on Thursday, ultimately settling lower after reports indicated that Saudi Arabia and Kuwait had lifted restrictions on the United States' use of its airspace and military bases, allowing the US to restart operations to escort commercial ships through the Strait of Hormuz as early as this week.

The global benchmark, Brent crude futures, settled down 1.2% or $1.21 at $100.06 a barrel, while US West Texas Intermediate crude futures settled down 0.28% or 27 cents at $94.81. This decline was largely attributed to optimism that Washington and Tehran were moving toward a limited, temporary agreement to halt their conflict.

In post-settlement trading, the global benchmark climbed more than $1, and WTI jumped $2, in response to a report by Iran's Fars news agency that several sounds resembling explosions were heard near Bandar Abbas city in Iran.

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According to the Wall Street Journal, Saudi Arabia and Kuwait had lifted restrictions on the US military's use of its airspace and military bases, citing US and Saudi officials. The Trump administration is looking to restart 'Project Freedom', its operation to guide vessels through the vital Strait of Hormuz waterway this week.

The US and Iran are edging toward a limited, temporary agreement to halt their war, sources and officials said on Thursday. A draft framework would stop the fighting but leave the most contentious issues unresolved and center on a short-term memorandum rather than a comprehensive peace deal.

A confirmed deal would likely push Brent prices back into the $80-$90 price range quickly, but a breakdown in talks or a Trump pivot back to strikes would immediately push prices north of $120 a barrel, according to SEB Research analyst Ole Hvalbye.

While a signed memorandum of understanding might reduce the risk premium in the paper market, it would not have much immediate impact on the high premiums for physical crudes. It would take weeks or months for the market to normalize after an agreement.

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On the supply front, Iran appears to have cut back oil production by 400,000 barrels per day and is likely to reduce it further as its storage units fill, according to US Energy Secretary Chris Wright. A Chinese-owned oil products tanker was attacked near the Strait of Hormuz on Monday, marking the first time a Chinese oil vessel has been attacked.

U.S. Treasury Secretary Scott Bessent urged China to intensify its diplomatic efforts to persuade Iran to open the Strait of Hormuz to international shipping. President Donald Trump and his Chinese counterpart Xi Jinping will discuss the subject when they meet next week.

The Iran war fallout was a main topic at the Southeast Asian bloc ASEAN meetings on Thursday, with renewed calls for a united front in the face of serious challenges for its fuel import-dependent economies. ASEAN leaders will on Friday call for good-faith negotiations between the US and Iran and a halt in hostilities, according to a working draft of a statement seen by Reuters.

Comparison of Oil Prices