Progress in US-Iran talks sparks optimism for reopening the Strait of Hormuz, easing supply concerns despite persistent shortfalls.
Oil prices dropped nearly 7% on Monday as diplomatic progress between the US and Iran fueled expectations of reopening the Strait of Hormuz, a critical chokepoint for global crude flows. The decline was amplified by thin trading volumes due to the US Memorial Day holiday and closed European markets.
Negotiators from both sides indicated progress on a memorandum of understanding to halt hostilities, with a 60-day window for a final agreement. However, analysts warned that an 11 million barrel-per-day supply shortfall could persist for months, as damaged infrastructure requires extensive repairs.
Ship-tracking data revealed limited but notable transit activity, including three LNG tankers and an Iraqi crude supertanker passing through the strait. The partial reopening offered early signs of easing supply constraints, though full normalization remains uncertain.