Oil prices dive on signs of Hormuz diplomacy while Saudi Arabia is left hanging in fight against an Iranian ally threatening crude’s other chokepoint

After weeks of diplomatic deadlock, a rare meeting between Iran and its Persian Gulf neighbors has offered hope for reopening the Strait of Hormuz, the critical energy chokepoint. The Gulf Cooperation Council, consisting of Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain, and Oman, will meet with their Iranian counterpart on Monday, sources told the Financial Times.

Brent crude oil prices dropped 2.9% to $104.52 a barrel on Friday, marking the first such gathering since the U.S. and Israel initiated their war against Tehran. The U.S. naval blockade hinders Iran's oil exports, while Iranian drone and missile attacks have prevented other exporters from returning to prewar levels. An agreement on the Iran-Oman shipping scheme would not fully reopen the strait, as Tehran demands the U.S. fulfill terms of their earlier ceasefire deal.

The GCC seeks a temporary agreement that allows ships to pass through. While the U.S.-guided oil flows have increased to two-thirds of prewar levels, Iran has threatened to use the strait as political leverage. Iran has recently launched missile attacks on U.S. bases, warships, and has assisted Houthi rebels in seizing territory near the Bab al-Mandab Strait, offering an alternative route for Saudi Arabia.

However, Saudi Arabia is not receiving much support from its allies, as U.S. officials only provided intelligence and targeting data following Saudi Crown Prince Mohammed bin Salman's phone calls. Pakistan, a defense ally of Saudi Arabia, is reluctant to antagonize Iran due to its own energy dependencies and fears of being dragged into a war.