WTI crude oil futures collapsed nearly 6 per cent on Wednesday to $88.30 a barrel, the lowest close in five weeks, after Iranian state television reported that Tehran was committed to restoring commercial shipping through the Strait of Hormuz to pre-war levels within a month. Brent dropped 5.4 per cent to $93.40, taking the global benchmark down sixteen per cent month-to-date.
The fall reverses much of the geopolitical risk premium that had been baked into crude since the late February US and Israeli strikes on Iranian nuclear facilities. At the peak of the Hormuz closure in March, Brent traded as high as $124 a barrel as tanker traffic through the strait collapsed to near zero and Saudi Arabia and the UAE struggled to reroute Gulf exports via the Petroline and Habshan-Fujairah pipelines.
Wednesday's move came in two distinct waves. The first leg lower, between the Asian morning and the European open, was driven by the Iranian state television report and a related Reuters story citing two unnamed Iranian officials who said the timeline would run from the signing of the US-Iran memorandum of understanding rather than its initialling. The second leg, in late New York trading, followed Treasury secretary Bessent's remark to reporters that the administration "was watching oil markets with care."
Tanker tracking specialists at Vortexa said Hormuz transits had already begun to recover from the May trough, with twelve VLCC-equivalent loads transiting the strait on Tuesday against a pre-war baseline of around twenty-eight per day. The recovery has so far been driven by Saudi and UAE crude, with Iranian and Iraqi flows still running well below normal because of insurance market reluctance and the broader risk of mine-laying.
Refinery margins have benefited. The Singapore complex margin rose to $14.20 per barrel on Wednesday, the highest in two months, and the European gas-oil crack climbed back above forty dollars. US gulf coast margins were less volatile but still rose, helping support refiner equities that had lagged in the May sell-off.
The broader macro signal has been mixed. Bond yields softened slightly on the lower-oil read-through to inflation expectations, but currency markets saw a relative bid for the dollar against the Norwegian krone, the Canadian dollar and other commodity-linked currencies. Traders now expect a return to roughly $85 Brent if the US-Iran memorandum is signed in the next ten days, and a return toward $105 if talks break down again.