US Crude Oil Drops Below $70 Per Barrel Amid Strained Iran Relations
Despite an Iranian attack on a cargo ship, traders remained optimistic about tanker traffic flow through the Strait of Hormuz, leading to a decrease in oil prices.
US crude oil prices fell below $70 a barrel on Friday, with West Texas Intermediate crude oil declining 3.4% to $69.46 and the global benchmark Brent crude oil dropping 3.1% to $72.18. This dip occurred even after reports of an Iranian attack on a Singaporean cargo ship transiting the Strait of Hormuz. The incident prompted the United Nations’ International Maritime Organization (IMO) to temporarily pause its evacuation of ships through the strait.
National average gasoline prices also saw a decline, hitting $3.90 a gallon according to AAA, a 13% decrease over the past month. This is significantly lower than the earlier highs of $4.56 a gallon this year.
The attack on the cargo ship came shortly after Iran had issued warnings to vessels not adhering to its sanctioned routes within the vital waterway. IMO Secretary-General Arsenio Dominguez stated that the pause in the evacuation plan was to reconfirm the necessary safety guarantees. He noted that the attacked vessel was not part of the IMO's evacuation framework.
Despite the temporary halt in evacuations and ongoing tensions, traders have expressed cautious optimism regarding the resumption of tanker traffic. The Strait of Hormuz is a critical chokepoint, typically handling about 20% of the world's oil supplies, and its previous blockades had caused significant energy supply disruptions. US crude oil prices had already fallen nearly 8% over the preceding week as vessels began exiting the Persian Gulf. Analysts, however, caution that a substantial drop in gasoline prices below the $3 mark could take many months.
The situation unfolds against a backdrop of complex negotiations between the US and Iran. The two nations recently signed a memorandum of understanding to officially reopen the strait, with a 60-day period for a final agreement. Earlier in the week, the US and Oman established a new UN-backed route along the Omani coast for ships that had been delayed in the strait. However, Iran has claimed this route was announced without its input.
Tensions remain high as the US and Iran continue efforts to reach an official peace agreement, which includes discussions on the unfreezing of Iranian assets. Arguments have been made by US officials, including President Trump and Vice President JD Vance, that funds from unfrozen Iranian assets could be used to purchase agricultural and medical supplies from the US, benefiting American farmers. These claims were reportedly rejected by the speaker of Iran’s parliament.