Iran war: Oil banking on phantom deal

Oil prices are running ahead of reality, pricing in a permanent US-Iran peace deal that does not yet exist.

IMAGE: Getty Images

Brent crude’s price has drifted lower, despite reports of commercial shipping coming under attack in the Strait of Hormuz recently.

Another commercial vessel was hit by an unknown projectile about 20 nautical miles northeast of Al Khasab, Oman, on Monday, the United Kingdom Maritime Trade Operations (UKMTO) agency reported.

“Vessels are advised to transit with caution,” the agency said, underscoring that regional maritime risks remain heightened.

The incident comes amid reports of ongoing peace negotiations between Iran and the US, after President Donald Trump signalled earlier this week that there is a chance of securing a deal with Tehran.

US treasury secretary Scott Bessent said in an interview with CNBC that a deal could be signed by today, while secretary of state Marco Rubio said talks with Iran and Oman made progress.

However, market analysts note that similar optimistic assurances have been offered in the past, only for hostilities to flare up days later. Consequently, the latest diplomatic overtures should be viewed with a healthy dose of scepticism.

“The scale of the sell-off [in Brent’s price] seems fairly overdone, given that there’s still considerable uncertainty,” two analysts from ING Bank noted. “We’ve been in this situation multiple times before, only to see things unravel,” they added.

Strait of Hormuz still mired in stagnation

Vessel tracking data showed 15 ships transited the Hormuz chokepoint yesterday, maritime intelligence firm Windward reported.

Although this marked an increase from the six vessels recorded a day earlier, traffic remains heavily suppressed and well below pre-conflict levels.

Roughly one-fifth of global seaborne oil supply moved through the Strait of Hormuz before 28 February, when the US and Israel launched a joint military attack against Iran.

“For now, tanker movements through the Strait of Hormuz remain highly constrained and so the global oil market continues to tighten,” ING Bank’s analysts said.

Oil prices have endured prolonged volatility during this period – oscillating wildly between diplomatic breakthroughs and missile attacks – even as actual cargo shipments stay heavily disrupted.

“There is the very real risk that any deal unravels fairly quickly, as we saw with the Memorandum of Understanding,” they added.

By Aparupa Mazumder

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