Oil prices fall as Middle East talks raise hopes of easing supply concerns

Oil prices experienced a decline of over Ksh129.40 on Thursday, prolonging a series of losses due to optimism surrounding Middle East talks. Brent crude futures dropped Ksh176.05, or 1.55%, to Ksh11,195 a barrel, marking a fourth consecutive day of declines. West Texas Intermediate crude futures also decreased Ksh181.23, or 1.7%, to Ksh10,500, in line for a fifth day of losses.

Tim Waterer, a chief market analyst at KCM, stated, "Oil has weakened again today as the market prices in rising expectations that a deal could materialise which would increase shipping numbers through the Strait of Hormuz." If the Strait were to reopen more fully, a further drop in crude prices is possible, but the market is not expected to fully recover to pre-conflict levels overnight.

Qatar's Prime Minister is set to travel to Iran on Thursday to resume diplomatic talks aimed at ending the conflict, which has been ongoing for nearly six months. The war has been largely paused, but no diplomatic progress has been made. Both parties are in disagreement over control of the Strait of Hormuz, a crucial chokepoint for global oil supplies that Iran has used as leverage.

The strait, which previously handled around one-fifth of daily global oil and liquefied natural gas supplies before the conflict began in late February, has been the focal point of concerns over global energy supplies. Shipping traffic at the strait increased slightly on Wednesday, despite the ongoing standoff. A senior Iranian source reported that Iran and Oman were working on finalizing details of an agreement to control the Strait of Hormuz, following an agreement between Iran's Revolutionary Guards and Oman on how to share the waterway.

The U.S. has paused its attacks on Iran for approximately a month and is seeking to enforce greater economic pressure on Iran, which has heightened investors' expectations for an easing of the Gulf supply disruptions. Priyanka Sachdeva, head of market insights at Phillip Nova, noted, "At the heart of the dispute remains Iran’s nuclear programme, and it is unlikely to be resolved quickly.

Iran also recognizes the significance of its geographical position and the leverage that the Strait of Hormuz provides, so the risk of prolonged uncertainty remains."