Oil slides 3.5% as traders bet on Hormuz supply recovery

WTI crude fell as much as 3.5% to $69.22 a barrel on Friday, sliding below $70 for the first time since early March, as traders priced in a recovery of Persian Gulf oil flows despite Iran's attack on a cargo vessel a day earlier.

"The market is clearly looking through the noise and focusing on tangible evidence of supply returning — stranded tankers exiting the Gulf, Saudi Aramco resuming loadings, and a diplomatic framework pointing toward normalization," said Warren Patterson, head of commodities strategy at ING Groep.

Brent crude for September delivery fell 3.1% to $72.91 a barrel, extending losses after settling at $75.26 on Thursday. Saudi Aramco resumed loadings at its Ras Tanura terminal on Friday after a near four-month halt, according to Reuters. The American Petroleum Institute reported U.S. crude inventories fell by 765,000 barrels last week, a smaller draw than analysts expected, while gasoline and distillate stockpiles rose by 1.2 million and 1.4 million barrels, respectively.

The selloff reflects a market recalibrating supply expectations after the U.S.-Iran memorandum of understanding opened the door for resumed Iranian exports and a broader reopening of the Strait of Hormuz, through which roughly 20 million barrels a day of oil and refined products flowed before the conflict. ING analysts estimate that oil flows through the strait need only return to around 14 million barrels a day for Persian Gulf supply to reach pre-war levels.

Iran's Coercion Campaign Meets Resistance

The Islamic Revolutionary Guards Corps Navy attacked a vessel about eight nautical miles southeast of Dahit, Oman, on June 25, hours after warning vessels to coordinate with Iranian authorities and use an Iranian-approved traffic separation scheme. The International Maritime Organization paused its evacuation plan for stranded vessels following the attack, which came a day after the IMO and Oman announced a joint initiative to establish a safe transit route along the Omani coast.

Commercially available maritime data showed at least 67 vessels transited the strait since the previous data cutoff, with 47 using the IMO-Omani route and only 10 using the Iranian-approved path, according to the Institute for the Study of War. The disparity illustrates why Iran may continue to target shipping — to compel vessels onto its designated route and assert control over the waterway.

The United States and Gulf Cooperation Council foreign ministers issued a joint statement on June 25 rejecting "any tolls, fees, or attempts to assert control over the strait," directly opposing Iran's proposal to charge vessels for transit services. Iranian officials told the Wall Street Journal that such fees could generate roughly $40 billion annually for the states involved.

Diplomatic Channels Open as Supply Resumes

Vice President JD Vance told a UK-based outlet on June 25 that the U.S. and Iran established a direct deconfliction channel in Doha, Qatar, between an IRGC representative and a U.S. Central Command official to resolve disputes. The mechanism is designed to prevent minor incidents from escalating into broader conflict.

The last time oil markets faced a similar supply disruption from the Persian Gulf was during the 2019 attacks on Saudi Aramco's Abqaiq and Khurais facilities, which temporarily knocked out 5.7 million barrels a day of production. In that instance, prices spiked 15% in a single session before retreating within weeks as supply recovered. The current selloff suggests traders expect a similar normalization, though the scale of the disruption — a multi-month closure of the Strait of Hormuz — is historically unprecedented.

This article is for informational purposes only and does not constitute investment advice.