West Texas Intermediate (WTI) crude climbed 2.5% on Thursday to about $90.45 a barrel, snapping a three‑day losing streak as ongoing disruptions in the Strait of Hormuz outweighed optimism over potential progress in U.S.–Iran talks.
The key shipping corridor, which moves about 20% of global petroleum consumption, remains heavily constrained by a dual U.S.–Iranian naval presence, keeping a geopolitical risk premium embedded in prices. Crude is still trading above $93 per barrel at points this week, more than 45% higher than a year ago.
Diplomatic moves temper, but do not erase, supply risk
Oil prices had softened earlier in the week on indications that Washington and Tehran were edging toward an understanding to de‑escalate tensions and restore normal maritime flows through Hormuz. Market attention is now on possible talks between the United States and Iran that could begin this week.
President Trump said renewed discussions may follow last weekend’s meetings in Islamabad, which ended without a deal. He separately announced a 10‑day ceasefire between Lebanon and Israel, scheduled to start at 5:00 p.m. Eastern Time. While that announcement eased some regional risk concerns, it has not materially improved the outlook for traffic through Hormuz.
Despite tentative signs of diplomatic progress, U.S. and Iranian forces continue to enforce overlapping restrictions in the area, limiting tanker movements and supporting elevated crude prices.
Iran tightens grip on Hormuz revenues
In a further assertion of control over the waterway, Iranian state media reported that Tehran plans to route all transit tolls for vessels crossing the Strait of Hormuz through domestic banks. The step underscores Iran’s effort to formalize and capture financial flows tied to a corridor that handles a substantial share of the world’s crude shipments.
Strait traffic remains sharply below normal
Ship‑tracking data highlight the scale of the disruption. Since a temporary ceasefire took effect on April 8, only 45 vessels have passed through the strait, compared with a pre‑conflict daily average of about 138 ships. The reduced throughput has become the dominant factor propping up crude benchmarks, offsetting improved sentiment around diplomacy.
Energy traders are closely watching for any sign that access restrictions could ease or that negotiations might stall. Either outcome could quickly shift expectations for near‑term supply and price direction.
U.S. inventories offer only a limited buffer
On the fundamental side, the latest U.S. Energy Information Administration data show domestic crude inventories fell by 0.9 million barrels last week to 463.8 million barrels. Stockpiles sit roughly 1% above the five‑year seasonal average, providing only a modest cushion against overseas supply shocks.
While the marginal decline in U.S. inventories is small relative to global flows, it leaves less room to absorb prolonged export disruptions from the Middle East.
Higher energy costs feed into inflation and policy risk
Sustained high oil prices are adding to global cost pressures. Rising fuel and transport expenses tend to filter through to broader inflation, complicating the task of central banks already weighing how tight monetary policy should remain.
Any perception that energy‑driven inflation is re‑accelerating could influence future rate decisions and liquidity conditions. Historically, periods of tighter liquidity have prompted traders to pare exposure to more speculative or higher‑volatility assets.
Volatility cools from peaks as markets price in de‑escalation
Despite the continued blockage, markets appear less fearful than at the height of the conflict. Reports suggest U.S. and Iranian negotiators are making progress toward a framework to end hostilities before the current ceasefire expires on April 21.
This has been reflected in volatility gauges. The CBOE Volatility Index (VIX) is holding near 18.2, well below its conflict‑era peaks, signaling a calmer tone in broader markets. An oil‑specific volatility index has also dropped from 126 to around 72—still elevated, but markedly less extreme than recent highs.
What a breakthrough could mean for prices and risk assets
A firm agreement that fully reopens the Strait of Hormuz would likely trigger a swift reassessment of global supply risk. Removal of the geopolitical premium could push oil prices lower, easing inflation concerns and giving central banks more room to adopt less restrictive stances if underlying data allow.
Such a shift could, in turn, create a more supportive backdrop for risk‑sensitive assets, as lower energy costs and softer policy expectations typically encourage greater appetite for exposure to markets with higher volatility. For now, traders remain focused on how quickly diplomacy can translate into restored traffic through one of the world’s most critical energy chokepoints.
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