WTI Crashes 5% as Hormuz Risk Fades

Oil prices tumbled on Tuesday as reports of progress toward reopening the Strait of Hormuz triggered a sharp unwinding of the market’s geopolitical premium.

WTI crude fell more than 5% at one point, while Brent dropped around 6% as traders priced in a lower risk of prolonged supply disruptions.

Reports said Iran and Oman were discussing a temporary navigation corridor through the Strait, along with efforts to clear mines. The waterway normally handles around one-fifth of global oil and LNG shipments, so any

progress toward reopening it could have a significant impact on supply expectations.

The sell-off also highlights how much of oil’s recent gains were tied to the Hormuz risk premium.

If shipping gradually returns to normal, the market could shift its focus back to inventories and demand, leaving prices more exposed to the downside.

WTI settled 3.1% lower at $82.36 on Tuesday, while Brent fell 3.9% to $88.58.

A sustained reopening of the Strait would put further pressure on prices, while any setback in talks could quickly bring the geopolitical premium back.