Iran and Oman Talk Strait of Hormuz Reopening as Trump Declares Mines Cleared: Oil Prices Slide

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There's a little bit of good news on the oil front, or at least the possibility of it. Iran has gone back to the table with Oman to talk about reopening safe passage through the Strait of Hormuz, and President Donald Trump says all the mines that were cluttering up the waterway have been cleared. That's the kind of headline that can make oil traders breathe a little easier, and indeed, prices slipped.

Markets Take a Breather

Late Tuesday, the futures market was showing a bit of red. Dow futures were down 26.00 points, or 0.05%, to 53,619.00. S&P 500 futures fell 13.75 points, or 0.18%, to 7,678.25, and Nasdaq 100 futures slipped 119.25 points, or 0.41%, to 29,157.50 as of around 8:47 p.m. EDT.

In the commodity pits, WTI crude oil dropped 1.97% to $80.74 per barrel, while Brent crude declined 2.14% to $86.68 per barrel. Natural gas futures, on the other hand, ticked up 1.34% to $2.807 per MMBtu. The U.S. dollar index, which measures the greenback against a basket of currencies, was basically flat at 98.917, up 0.02% as of around 6:27 a.m. IST.

Asian markets were a mixed bag. South Korea's KOSPI managed a 0.16% gain to 6,753.41, while Japan's Nikkei 225 fell 0.44% to 65,568.24.

Iran and Oman: Let's Make a Deal?

Iran and Oman have been talking, and according to Reuters, they've discussed a framework for a temporary navigational corridor through the Strait of Hormuz. They've also agreed to work together on clearing mines from the waterway. That's a big deal because this strait is a critical chokepoint, handling roughly one-fifth of the world's oil and liquefied natural gas shipments. Getting it back to something resembling normal would be a significant win for global energy markets.

The talks are happening even as diplomatic efforts between Iran and the U.S. remain stuck in neutral. Washington is still cranking up the economic pressure on Tehran with sanctions, so this is more of a regional backchannel than a sign of a broader thaw.

Trump's Mine-Clearing Claim

On Tuesday, Trump said that all mines in the international waters of the Strait of Hormuz had been removed or detonated. He also had a warning for Iran: don't even think about laying more mines, because the U.S. would respond forcefully. It's a strong statement, but the situation on the water tells a slightly different story.

Despite Trump's declaration and the Iran-Oman talks, commercial shipping through the strait is still a risky business. The U.K. Maritime Trade Operations reported that an oil tanker was hit by an unidentified projectile on Tuesday and disabled about 9 nautical miles (17 kilometers) northeast of Ash Shishah, Oman, near the entrance to the strait. So, while the mines might be gone, other dangers remain.

Diplomats Heading Back

In a related development, the U.S. has started sending personnel back to some diplomatic missions in the Middle East that were evacuated or scaled back during the conflict. According to two people familiar with the matter, the phased move includes posts in Lebanon, Israel, Saudi Arabia, and Baghdad. This suggests Washington thinks the immediate risk of further escalation has eased. But don't expect a full house right away; some embassies will initially operate with reduced staffing as security conditions are still being assessed.

So, the picture is mixed: diplomatic wheels are turning, but the seas are still not entirely safe. Oil prices are reflecting a bit of optimism, but traders know that one incident can change the narrative in a hurry.

Image via Shutterstock/ Below the Sky