Oil Prices Slip as Iran–U.S. Talks Show Progress and Supply Concerns Ease

BY COOMFORT OGBONNA

Oil prices fell in early trading on Thursday after Qatar reported that indirect talks between Iran and the United States had made “positive progress,” easing concerns about disruptions in the Strait of Hormuz, one of the world’s most critical oil shipping routes.

Brent crude futures dropped 73 cents, or 1.02%, to $70.84 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 83 cents, or 1.21%, to $67.75 a barrel. Both benchmarks had already fallen more than 1% in the previous session, reaching their lowest levels in about four months.

The latest decline comes as diplomatic discussions in Doha focused on restoring stable maritime traffic through the Strait of Hormuz and addressing the release of frozen Iranian assets. The waterway is a vital global energy corridor, historically responsible for transporting around one-fifth of the world’s oil supply before recent tensions escalated in the region.

According to sources familiar with the talks, negotiators spent two days discussing security arrangements for shipping lanes and potential frameworks for easing restrictions on Iran’s financial assets. While tanker traffic has begun to recover, tensions have not fully eased, with reports of recent exchanges of strikes following an earlier attack on a cargo vessel attributed to Iranian forces.

Iran has continued to assert its strategic influence over the strait, with senior Iranian officials reportedly stating that the country intends to seek international recognition of its authority over the waterway, even if that requires force. Tehran has also signaled plans to impose shipping tolls beginning in mid-August after a temporary toll-free period outlined in earlier agreements expires, raising uncertainty over long-term transit costs.

Despite these tensions, U.S. Vice President JD Vance said oil flows through the Strait of Hormuz have effectively returned to pre-conflict levels, although no detailed figures were provided. The partial normalization of tanker traffic has helped ease immediate supply fears in global energy markets.

Market analysts say the reopening of shipping lanes, combined with expectations of steady or rising production, has shifted sentiment toward concerns of oversupply. With more oil potentially entering the market at a time when demand signals remain uncertain, prices have come under additional downward pressure.

Adding to that outlook, sources indicate that OPEC+ producers are likely to agree on another increase in output targets at their upcoming meeting. The expected adjustment is around 188,000 barrels per day for August, matching previous monthly increases for June and July. If confirmed, the move would add further supply to an already well-supplied market.

In the United States, however, data showed a surprise draw in crude inventories. Stockpiles fell by 3.8 million barrels to 408.4 million barrels last week, the lowest level since September 2018, according to the Energy Information Administration. The decline was smaller than analysts had expected, with forecasts in a Reuters poll pointing to a 4.5 million barrel drop.

Even with the inventory decline, traders appear more focused on global supply dynamics and geopolitical developments in the Middle East. The combination of easing tensions in key shipping routes and expectations of higher production from major exporters has strengthened the bearish outlook for crude prices in the near term.

Overall, oil markets remain highly sensitive to developments in the Strait of Hormuz, OPEC+ production decisions, and shifting geopolitical risks, with recent diplomatic progress helping to temporarily calm fears of major supply disruptions.