Oil prices well below $100 as Strait of Hormuz reopens but experts aren’t convinced just yet. Here’s why

In a significant relief for global economies and financial markets, Iran announced that the Strait of Hormuz, the world’s most critical oil transit route, is now “completely open” to all commercial vessels and will remain so for the duration of the ceasefire. The development comes as U.S. President Donald Trump said an agreement to end the U.S.-Israeli conflict with Iran was “very close”.

The easing of tensions triggered a sharp fall in oil prices on Friday. Brent crude futures dropped $9.01, or 9.07%, to settle at $90.38 a barrel, after touching an intraday low of $86.09. U.S. West Texas Intermediate crude fell $10.48, or 11.45%, to close at $83.85 a barrel, after slipping to a session low of $80.56.

Prices had already been under pressure in recent sessions amid expectations of further U.S.-Iran talks over the weekend. A 10-day ceasefire between Lebanon and Israel also lifted hopes that the broader Middle East conflict may be approaching a resolution.

On a key issue in the negotiations, Trump said Tehran had proposed refraining from possessing nuclear weapons for more than 20 years. “We’re going to see what happens. But I think we’re very close to making a deal with Iran,” he told reporters outside the White House on Thursday.

Despite all this, experts believe the worst isn’t over just yet.

Tamas Varga, an analyst at PVM Oil Associates, told Reuters that traffic through the strait could be disrupted again if disagreements over Iran’s nuclear programme and the lifting of U.S. sanctions persist.
Brokerage firm Macquarie noted that even if tensions ease, oil prices are likely to stay supported in the $85 to $90 range, with a gradual move toward $110 as flows through the Strait of Hormuz normalise. It added that if disruptions extend through April, Brent could still rise to $150 per barrel.

Market experts believe crude may be entering a structurally higher price phase. The current ceasefire is temporary and a return to pre-war levels of $70 to $75 could take several months. Analysts warn that in the near term, he expects crude to remain within a range of $80 to $85 on the downside and $95 to $100 on the upside.

Nuvama Institutional Equities warned that the continued closure of the Strait of Hormuz, which handles around 20 million barrels per day, could push crude prices to the $110–150 per barrel range.

Offering a contrarian view, domestic brokerage Emkay said the ceasefire signals the end of the Gulf conflict and could bring a “peace dividend” for India. Brent crude is expected to settle in the $75 to $80 range in the near term, with further downside possible as traffic through the Strait of Hormuz normalises and damaged infrastructure is restored over the next two to three quarters.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)