Oil drops 4% as Hormuz reopening deal nears, Chinese majors fall

US crude futures fell about 4 percent to below $77 a barrel Tuesday after Treasury Secretary Scott Bessent said Washington and Iran may reach an agreement to reopen the Strait of Hormuz within two days, restoring free passage for commercial vessels through the strategic waterway.

"We are in talks with the Iranians, and I think there is a chance we may have a deal today or tomorrow," Bessent said in a CNBC interview.

Brent crude, the global benchmark, dropped more than 2 percent to about $82 a barrel. In Hong Kong, CNOOC Ltd. fell 2.46 percent to HK$23, PetroChina Co. slid 2.49 percent to HK$9.405, and Sinopec Corp. declined 0.8 percent to HK$4.31, with short-selling ratios reaching 4.4 percent, 12.9 percent and 24.9 percent respectively.

A reopening would restore a conduit carrying roughly a fifth of global oil supply, reversing a blockade that has cut traffic through the strait to a tenth of pre-conflict levels and removed an average of 11 million barrels per day of liquids supply from the market. Aramco Chief Executive Amin Nasser said the world has lost more than 2.6 billion barrels of oil since the crisis began, with Asia's crude imports falling by around 6 million barrels per day at the peak.

Negotiations hinge on transit fees, sanctions relief

The proposed arrangement would split the waterway into two routes: ships entering the Persian Gulf would pass through an Iranian-controlled corridor, while departures would use a route managed by Oman. Iran has demanded the right to collect transit fees, potentially shared with Muscat, alongside guarantees against renewed attacks, relief from oil sanctions and an end to the US naval blockade. Washington and regional governments have rejected the fee proposal, according to the Wall Street Journal, citing regional mediators.

Secretary of State Marco Rubio said progress had been made in the talks, while Qatari foreign ministry spokesman Majed al-Ansari said draft language of a possible agreement had been "circulated among the parties." Iran's foreign ministry spokesperson Esmaeil Baghaei described the Oman-mediated discussions as "positive" but said outstanding issues include the mechanism for reopening the waterway, maritime service fees and security arrangements. Tehran maintains it is negotiating with Oman rather than directly with Washington.

The diplomatic push follows President Donald Trump's decision over the weekend to call off planned strikes on Iran to preserve the negotiating track. The US naval blockade, reinstated July 14 after an interim Pakistan-mediated deal unraveled, remains in force until "a deal or total surrender is accomplished," Trump said on Truth Social. Kpler data showed only six vessels — three tankers and three bulk carriers — transited the waterway Monday, all using the route through Iranian waters.

Brent swings 7% as traders weigh reopening

Oil prices have swung sharply on the diplomatic headlines. Brent crude fell nearly 7 percent Monday after Trump suspended the strikes, before Tuesday's additional decline. The last time the strait was effectively closed — during the 2019 tanker attacks — prices spiked but normalized within weeks once shipping resumed, a pattern traders are now weighing against the far deeper supply disruption this time.

Aramco has been routing crude around the strait via its East-West pipeline to the Red Sea, and Nasser said the company reported a 42 percent jump in second-quarter profit. But he warned that "normalization will take time," estimating it would take up to 18 months at an average rate of 2.1 million barrels per day to replenish depleted inventories. The global refining system is "stretched heavily," Nasser added, warning that any major unplanned refinery shutdown could intensify supply pressure.

For Chinese oil majors, the prospect of a deal removes a geopolitical risk premium that has supported crude prices. CNOOC, PetroChina and Sinopec — which benefit from higher oil prices through upstream operations — face margin compression if the strait reopens and supply normalizes. Conversely, a resolution would ease input costs for China's refining and petrochemical sectors, which have absorbed higher crude prices since the conflict began in late February.

If an agreement is announced Wednesday as Bessent suggested, the immediate test will be whether the Revolutionary Guards accept the terms. Some IRGC officials have told mediators they would reject any deal that does not recognize Iran's claim to control the strait, raising the risk that the diplomatic breakthrough unravels before shipping volumes recover. Mediators have also questioned whether Iranian diplomats have sufficient authority to finalize an agreement, given the Guards' outsized role in security decisions.

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