According to a MarsBit market analysis, international oil prices have recently declined significantly, primarily due to the resumption of navigation in the Strait of Hormuz and a 60-day interim arrangement between the U.S. and Iran. Under this arrangement, Iran's oil sales have loosened, leading to expectations of increased short-term supply and putting downward pressure on prices. However, despite these supply-side relief signals, the market has not fully eliminated concerns over broader geopolitical risks in the Middle East.
The analysis points out that oil prices' downside is constrained by multiple factors. First, the negotiation period is limited to only 60 days, and mutual trust between the parties is weak, making a long-term agreement unlikely. Second, the U.S. Strategic Petroleum Reserve is at historically low levels, weakening its ability to intervene in the market. These factors mean that if geopolitical tensions escalate again, oil prices could rebound quickly, limiting the room for further declines.
Overall, oil prices are currently caught between short-term supply improvement expectations and medium-term geopolitical risks. Price volatility will remain highly dependent on the progress of U.S.-Iran negotiations and developments in the Strait of Hormuz, with market sentiment likely to shift rapidly on new headlines.