Oil Falls More Than 2% as Peace Hopes Boost Hormuz Opening Prospects
Oil prices extended their decline on Thursday (May 7), falling more than 2% as hopes for a peace deal that could gradually reopen the Strait of Hormuz grew.
Brent crude fell US$2.16, or 2.13%, to US$99.11 per barrel at 07:32 GMT, while WTI fell US$2, or 2.1%, to US$93.08.
These declines came after both benchmarks had already fallen more than 7% on Wednesday, hitting two-week lows amid optimism that the Middle East conflict could ease. The market appeared to be quickly trimming the geopolitical risk premium that had previously restrained supply and raised concerns about energy shipping disruptions.
Sentiment was also affected by an Al Arabiya report that said there had been an "understanding" to ease the US blockade of Iranian ports in exchange for a gradual reopening of the Strait of Hormuz, although the report could not be verified. At the same time, Iran stated it was reviewing a US peace proposal that, according to sources, would formally end the war but still leave key US demands regarding Iran's nuclear program and the opening of the Strait of Hormuz intact.
For the market, the "diplomacy vs. disruption" battle makes prices highly sensitive to headlines. If a deal is reached, the geopolitical premium could quickly disappear from prices and put downward pressure on oil; however, the risk of a reversal remains high if there are further attacks on energy infrastructure or regional escalation that reignites supply concerns.
Looking ahead, investor attention will be focused on developments in negotiations leading up to next week's US-China summit, including discussions on Hormuz, as well as any official signals from the parties involved. The variables the market is monitoring remain the same: clarity on the status of the Strait of Hormuz, the security of energy infrastructure in the region, and the consistency of diplomatic communications will determine whether this weakening continues or reverses.
Source: Newsmaker.id
