Oil prices slide 2% on Iran-Oman talks to reopen Strait of Hormuz

Oil prices fell roughly 2% on Wednesday, following a prior day's decline, due to optimism that Iran and Oman have recommenced discussions about managing the Strait of Hormuz. Brent crude futures slipped $1.78, or 2.0%, to $86.80 a barrel, while U.S. West Texas Intermediate crude futures dropped $1.49, or 1.8%, to $80.87. Both indices had declined over 3% on Tuesday.

Analyst Mitsuru Muraishi from Fujitomi Securities noted that market reactions to developments around strait navigation and hopes for progress in Iran-Oman talks have driven selling, but uncertainty has led to bargain buying, thereby preventing larger losses. Prices are expected to remain within a narrow range for now. Iran announced it had resumed talks with Oman aimed at regulating traffic in the strategically important waterway, which had handled one-fifth of global oil and liquefied natural gas shipments before the February conflict began.

The two countries had previously engaged in intermittent talks about establishing a temporary navigational corridor and clearing the strait of mines. Despite ongoing tensions, the U.S. is gradually resuming diplomatic presence in some Middle Eastern missions that were either evacuated or scaled down due to Iran. However, some embassies will initially run at reduced capacity.

Washington also expanded sanctions targeting Iran's economic dependencies, though it stated it would not impose penalties immediately. Meanwhile, an oil tanker was attacked and disabled about 9 nautical miles northeast of Oman's Ash Shishah, in the Strait of Hormuz, on Tuesday. U.S. crude oil inventories expanded by approximately 4.2 million barrels in the week ending August 21, according to market sources.