By Monsurat Abisoye
Global oil prices have dropped to their lowest levels in nearly 15 weeks despite continued uncertainty surrounding the reopening of the Strait of Hormuz.
Brent crude declined by almost 2.5 per cent on Tuesday to trade slightly above $81 per barrel, following a 4.75 per cent drop recorded on Monday. The latest decline marks Brent’s lowest price since 4 March, around the period when the conflict involving Iran escalated.
Despite the recent losses, Brent remains above its pre-war level of $72.48 per barrel.
Market participants are increasingly optimistic that the eventual reopening of the Strait of Hormuz will boost oil supplies from the Middle East. This follows comments by United States President Donald Trump indicating that the strategic shipping route would reopen once Washington and Tehran finalise an initial memorandum of understanding.
However, analysts have warned that normal operations in the waterway may not resume immediately. They noted that some production facilities may require repairs or reopening, while several oil and gas tankers are currently positioned away from key transit routes.
The Chief Executive Officer of Mitsui OSK Lines, the world’s largest tanker operator, told the Financial Times that shipping companies are unlikely to resume passage through the Strait for several weeks until they are convinced that the agreement between the US and Iran is substantial and sustainable.
Kathleen Brooks, Research Director at XTB, said major shipping firms would require more than a signed agreement before allowing vessels carrying cargo worth hundreds of millions of dollars to return to the route.
According to her, the removal of mines and a complete end to hostilities would be necessary to ensure safe navigation and prevent any renewed tensions from disrupting shipments.
Brooks added that although progress towards a peace agreement may ease market concerns, Brent crude is likely to remain above $80 per barrel until oil tankers can successfully transit through the Strait of Hormuz without security risks.
