Crude Oil Slumps on Hormuz Easing Bets

Crude prices fell on Friday as traders weighed signs that tensions around the Strait of Hormuz could ease and moved to take profits after a sharp run-up earlier in the week. The pullback came after Brent and WTI had surged in recent sessions on fears that shipping through the key waterway could be disrupted for longer.

West Texas Intermediate for October delivery was last trading down $2.63, or 2.57%, at $99.85 a barrel. That left the benchmark below the $100 mark after it had built up more than 10% in gains over the week’s trading sessions. The move reflects a market that had already priced in a large risk premium and was vulnerable to reversal once the immediate threat looked less severe.

Signs of a possible diplomatic opening

Market sentiment shifted after reports pointed to a possible meeting between Iran and members of the Gulf Cooperation Council in the coming week. That raised hopes of a reopening of the Strait of Hormuz, which has been effectively shut to shipping traffic amid the latest flare-up in regional tensions. The prospect of even limited progress toward de-escalation was enough to encourage a selloff in crude.

U.S. President Donald Trump, speaking in Texas, said the conflict between the U.S. and Iran would end after the November midterm elections and added that oil and gasoline prices would fall afterward. He also said talks with Iran could happen, while stressing that Washington was not eager for dialogue. Those comments added to the view that the crisis might not remain at peak intensity for much longer.

Shipping flows remain tightly constrained

Even with the softer tone, the Strait of Hormuz remained heavily restricted for tankers. Reuters, citing Friday data from ship-tracking firm Kpler, said vessel transits through the strait dropped to seven on Thursday from 11 the day before, well below the 10-day average of 15. Of those seven vessels, five entered the waterway and two left it, underscoring how constrained traffic still was.

The recent exchange of attacks between Iran and the U.S. has kept energy markets on edge, but Friday’s price action showed that traders are also sensitive to any hint of a diplomatic off-ramp. With the market already carrying a substantial premium from the week’s rally, even modest hopes of easing in the Gulf were enough to trigger profit-taking and send crude lower.

This article is not investment advice and recommends no asset, level or direction; a single session's move is not evidence of a trend. For background see Markets, Bear Market, BIST 100, and for terms the finance glossary.