Crude oil prices edged lower on August 6 as investors assessed growing signs of diplomatic progress between Iran and Oman that could pave the way for a broader U.S.-Iran peace agreement, potentially ending the five-month conflict and reopening the Strait of Hormuz to normal shipping traffic. Brent crude futures fell 37 cents, or 0.5%, to $79.08 a barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped 53 cents, or 0.7%, to $74.69 a barrel.
Brent had ended marginally higher in the prior session, whereas WTI had settled slightly lower, according to data cited by ETMarkets.com. A proposed agreement brokered with Oman's involvement would hand Tehran control over vessels entering the Gulf through the Strait of Hormuz, a senior Iranian source and two regional officials told Reuters. The proposal represents one of the largest concessions offered to Iran in the ongoing negotiations.
U.S. President Donald Trump has indicated that a deal to reopen the strait is close, though U.S. officials have consistently stated they would not accept Iranian control over access to the world's most critical energy trade route. Complicating the diplomatic backdrop, Iran has warned Gulf states that any renewed U.S. military strike on its territory would trigger retaliation against key energy infrastructure across the region.
The threat is widely interpreted as Tehran's attempt to raise the strategic cost of military action against its closest regional allies of Washington. Adding further tension, Yemen's Iran-aligned Houthi movement reported on Wednesday that it had launched missile attacks on a Saudi oil tanker near the Red Sea port of Yanbu and on another Saudi vessel in the Gulf of Aden. Saudi Arabia has not confirmed either incident.
The continued threat of Houthi attacks on Red Sea shipping lanes is tempering market optimism over a broader recovery in Middle East maritime trade routes. Market analysts at major financial institutions have outlined significant price risks tied to the duration of supply disruptions. JPMorgan estimates that each additional month of disruption could push Brent crude prices higher by approximately $7 to $8 a barrel.
Should the disruption extend to three months, the bank projects average monthly Brent prices could reach around $114 a barrel. Goldman Sachs has similarly cautioned that Brent could surge to $120 a barrel if disruptions to Strait of Hormuz shipping persist. However, the bank's base case assumes that Middle East tensions will eventually de-escalate.
Under that scenario, Goldman Sachs expects Brent to average $80 a barrel in the fourth quarter and $75 a barrel in 2027. The bank noted that risks to its forecast remain skewed to the upside, citing the potential for continued disruptions in both the Strait of Hormuz and the Red Sea. Anindya Banerjee, Head of Commodity Research at Kotak Securities, offered a longer-term perspective.
"The direction of our outlook is unchanged; the path and the timeline have shifted. We still expect oil to cool as we move into 2027, for three reasons: supply outside the conflict zone is expanding, with OPEC+ raising production targets, the UAE at record output and non-OPEC barrels responding to price," Banerjee said. Source: The Economic Times / ETMarkets.com, reporting by Veer Sharma.
Source: m.economictimes.com