Oil drops nearly 6% as two China-bound supertankers cross Strait of Hormuz
Brent crude falls to about $105 a barrel as Asia-bound vessels raise hopes of resumption of energy flows
Two supertankers carrying Iraqi oil to China passed through the Strait of Hormuz on Wednesday, raising hopes of a partial opening of the vital chokepoint for Middle Eastern energy and sending crude prices tumbling.
Shipping data showed the two ships traversing the strategic waterway. A third supertanker transporting Kuwaiti oil to South Korea was also shown to be in the strait before its transponder was switched off.
Collectively, the three ships are carrying 6mn barrels of oil, potentially the largest volume to exit the Gulf in a single day since the US and Israel started the conflict with Iran at the end of February.
The supertankers steered through the northern side of the strait, following a route designated by Iran. “It is most likely that there was a deal done with Iran,” said Matthew Wright, lead shipping analyst at data company Kpler.
Analysts at shipping data company Windward said the passage of the ships, two days after Iran launched a new agency to administer permits and charge tolls, suggested the strait “is no longer a closed corridor but a contested and tiered-access environment”, shaped by US and Iranian enforcement.
To boost the credibility of its new agency, Tehran also on Wednesday said 26 vessels had passed through the strait over the previous 24 hours, although it was not possible to verify the claim using ship-tracking data.
Brent crude settled 5.6 per cent lower at $105.02 a barrel as traders reacted to the optimism over the crossings, the prospect of further negotiations between the US and Iran, and the latest US data showing better than expected stocks of petrol and diesel.
The fall in oil prices sparked a rally in global bond markets, which had sold off sharply over the past week on fears that the prolonged closure of the strait was fuelling a surge in inflation. The 10-year Treasury yield fell 0.1 percentage points to 4.57 per cent.
On Monday, Tehran announced the creation of the Gulf Strait Authority (PGSA), describing it as the “legal entity and representative authority for managing the passage and transit through the Strait of Hormuz”.
Wright said the new body was “a formalisation” of Iran’s previous requests for vessels to seek permission and pay fees for passage.
The supertankers’ transit came after US President Donald Trump said he was holding off on renewing attacks on Iran, while claiming “serious negotiations” with Tehran were taking place.
He added Saudi Arabia, Qatar and the United Arab Emirates had asked him to suspend the military assault. Riyadh and Doha are supporting mediation efforts to build on a fragile ceasefire and secure an agreement to end the war.
Trump on Wednesday repeated his warnings that the US could hit Iran “even harder” if Tehran does not agree to a deal.
Saudi Arabia’s foreign minister Prince Faisal bin Farhan earlier on Wednesday said the kingdom “highly appreciates” Trump’s decision to “give diplomacy a chance”.
“Saudi Arabia looks forward to Iran seizing the opportunity to avoid the dangerous implications of escalation, and urgently responding to the efforts to advance the negotiations leading up to a comprehensive agreement to achieve lasting peace in the region and the world,” Prince Faisal said on X.
However, Mohammad Bagher Ghalibaf, Iran’s parliament speaker and influential wartime leader, said in an audio message on Wednesday that the US had not abandoned its military objectives and was seeking a “new round of adventurism and war”.
Iran brought the strait to a standstill in the early days of the conflict by threatening to fire on any vessels, while the US imposed its own naval blockade in mid-April to prevent ships entering or leaving Iranian ports.
Meanwhile, the shipping industry issued new guidance on how to safely transit the strait on Wednesday. In a 22-page document for shipowners and crews, a group of industry bodies outlined when to consider a crossing, when not to and how to proceed.
It warned all routes through the strait carried elevated risk, that ships should take into account reports of mined areas and that there had been incidents on the northern and southern routes.
Shipping traffic through Hormuz has been sharply curtailed since the conflict began, although crossings have not stopped altogether. A small number of vessels have passed through the strait each day.
According to Kpler, six other supertankers have transited Hormuz this month bound for Asia, and a total of almost 17mn barrels of crude have passed through the strait. Gulf exporters shipped almost 28mn barrels through it during April.
Wright cautioned against interpreting Wednesday’s movements as evidence of a broader reopening of Gulf oil flows.
“What we have seen is a handful of negotiated transits. Fundamentally, nothing has changed,” he said. “The real test will be whether we see more Chinese or Korean-bound vessels going forward.”