Oil Prices Crash to Pre-War Levels as Shipping in Strait of Hormuz Stumbles Back

Oil prices have nosedived to levels not seen since before the US-Iran war, with the gradual recovery of shipping through the Strait of Hormuz stripping away the risk premium that had sent crude soaring during the conflict.

West Texas Intermediate, the US crude benchmark, hit approximately $68.00 a barrel on Thursday morning, while Brent crude, the international standard, fell to $71.16.

The declines follow steep losses from the previous session, where Brent closed down 1.9 percent at $71.57 and WTI settled 1.3 percent lower at $68.58.

Both contracts suffered more than 20 percent losses in June, with Brent marking its largest monthly decline since March 2020 and WTI recording its worst monthly performance since late 2021.

This drop coincided with US President Donald Trump’s remarks about positive developments in talks with Iran in Qatar.

"As far as things are going, the denuclearisation of Iran is moving along well," he stated to reporters on Wednesday. "They've had very good meetings, and we'll see."

Trump's son-in-law Jared Kushner and US special envoy Steve Witkoff arrived in Doha on Tuesday for indirect discussions with Iran via Qatari mediators, following renewed hostilities over the weekend that threatened a 60-day truce established on June 17.

This agreement, a 14-point memorandum of understanding, aimed to restore commercial shipping through the strait as part of broader ceasefire efforts.

Tanker traffic through the Strait of Hormuz, which accounts for roughly 20 percent of global oil supply, has begun to recover, although vessel movements remain significantly below pre-conflict levels.

"Admittedly, there has been a slight pickup in inbound tanker traffic, suggesting that shipowners are becoming increasingly confident about moving vessels into the Persian Gulf," noted ING strategists Warren Patterson and Ewa Manthey in a research note.

"If this trend accelerates, it becomes a clear headwind, and potentially a direct challenge, to our view that oil prices should rise from current levels."

Iranian state media reported on Wednesday that a foreign container ship had run aground in the strait while navigating an unauthorized route, though no further details about the vessel were provided.

The market faces bearish signals on the supply side as well. The US Energy Information Administration reported a decrease in commercial crude inventories by 3.775 million barrels for the week ending June 26—a tenth consecutive weekly draw—but this decline was less than market expectations for a 5.1 million barrel drop.

US crude stockpiles have fallen to their lowest level since September 2018. Meanwhile, OPEC+ is anticipated to approve another production increase of around 188,000 barrels per day for August when the group convenes on Sunday, matching increases announced for June and July.

Unresolved differences between Washington and Tehran persist.

Iran asserts that the Strait of Hormuz falls under its sovereignty and seeks to impose transit tolls on commercial vessels. The US insists that the waterway must remain open for free commercial shipping. No permanent deal has been finalized, and disputes over inspections of Iran's nuclear program also remain outstanding.