Treasury Secretary Scott Bessent said a deal to reopen the Strait of Hormuz with “freedom of movement” for commercial ships could be reached as early as Tuesday or Wednesday, triggering a sharp sell-off in oil markets that pushed Brent crude to a three-week low.
Oil prices tumbled sharply, with Brent, the international benchmark, sliding 5.3% to close at $79.36 per barrel. West Texas Intermediate futures lost 5.7% to settle at $75.77. Both contracts dropped to their lowest levels since 13 July, as investors reacted to signs that supply disruptions through one of the world’s most critical shipping chokepoints could ease within days.
Bessent told CNBC’s “Squawk Box” that the United States was in talks with Iran. “There is a chance we may have a deal today or tomorrow to open the strait and move towards a more normalized position in this conflict,” he said. When asked whether Iran would be allowed to charge a toll for ships passing through, he replied: “It would be freedom of movement.” He added that prices should drop further once hundreds of ships stuck in the Persian Gulf are able to exit, noting that the relief would extend beyond energy to fertilizer, refined products, and industrial gases.
Secretary of State Marco Rubio confirmed that progress had been made in discussions involving Iran and Oman on getting more ships through the strait. “There’s been progress made in those talks but not finality yet,” Rubio told reporters at the State Department. “We’re hoping that will happen very shortly.”
A fragile history of failed agreements
The optimism from senior US officials was tempered by the track record of previous negotiations. The United States and Iran signed a memorandum of understanding on June 17 to reopen the strait, but that agreement quickly collapsed over a disagreement between Washington and Tehran on which route ships could use to transit. Iran wants commercial vessels to sail through its territorial waters, while it has repeatedly attacked tankers that transited along Oman’s coast under US military protection. Washington launched more than a dozen waves of airstrikes and reimposed its naval blockade on Iran in retaliation.
Iran has said it is not negotiating with the United States and has no plans to do so, instead talking to Oman, which is serving as a mediator. A spokesman for Iran’s foreign ministry said talks with Oman on a new mechanism for vessels passing through the strait had been positive. Qatar, another key mediator between Washington and Tehran, said it was continuing efforts with other mediators to achieve a diplomatic resolution but acknowledged no direct talks were currently planned.
No details have been released. The Strait of Hormuz has been central to negotiations between the US and Iran. Before the conflict began in late February, the waterway handled about one-fifth of global daily oil and liquefied natural gas supplies. Iran has halted most traffic through the strait since the fighting started, while the United States has also imposed a naval blockade on Iranian ports in the region.
Analysts warn of likely failure
Ryan McKay, director of commodity strategy at TD Securities, was blunt about the prospects. “Iran is unlikely to agree to any deal without getting control of the Strait, and thus we view any potential deal as being highly likely to fail at this point,” he said in a Tuesday note. McKay also said oil exports through Hormuz are unlikely to surge after a deal, as flows were already in line with what the current production recovery would imply.
Danni Hewson, head of financial analysis at AJ Bell, echoed the caution. Prices remain elevated. “Investors are acutely aware of how many times we’ve already been at this point in the war and how fragile the process of securing lasting agreements can be,” she said. The disruption has sent fuel prices up across the world. In the UK, the average cost of a litre of petrol hit £1.60, according to the RAC motoring group. In the US, gasoline prices averaged above $4 a gallon, with diesel near $5.40, according to AAA.
President Donald Trump said over the weekend that he had called off a major attack on Iran to allow negotiations over Hormuz to proceed. Trump has repeatedly teased a deal to resolve the war only for fighting with Tehran to escalate again.
Tehran is considering allowing European countries to clear mines from the strait, diplomats familiar with the matter told Bloomberg News. Mines in the waterway are one of the biggest obstacles to normalizing traffic. Separately, a cargo ship was struck Monday by an unknown projectile about 20 nautical miles northeast of Al Khasab, Oman, according to the United Kingdom Maritime Trade Operations Centre. On Tuesday, a projectile sank an Indian-flagged vessel near Yemeni waters, with all 14 people on board rescued, India’s shipping minister said.
US stock markets traded higher on Tuesday, buoyed by the falling oil prices and corporate results related to artificial intelligence. Another blockade remains in place on Saudi Arabia’s ports in the Red Sea, imposed by Yemen’s Iran-backed Houthis since 20 July. That route had become a crucial alternative since Iran blocked the strait, but it has become increasingly dangerous, with a spate of attacks on vessels reported in the past week. Analysts believe the threat to ships carrying oil in the Middle East is at its worst since the Iran war started.