Brent crude has dropped below USD90 per barrel as easing geopolitical tensions in the Middle East reduce supply risk premiums, according to OCBC Bank strategists Sim Moh Siong and Christopher Wong. The decline follows improved prospects for safe passage through the critical Strait of Hormuz shipping route and recent diplomatic engagement between Iran and Oman, which have calmed immediate supply disruption fears.
The Strait of Hormuz handles roughly one-fifth of global oil traffic, making any threat to its operations a significant price driver. The current diplomatic progress suggests reduced probability of Iranian action that could close or disrupt the waterway. Energy traders and commodity-focused funds are adjusting positions as the geopolitical risk premium compresses, while oil-dependent currencies and energy sector equities may face near-term pressure from sustained lower prices.
FXnCO Insight
Traders should monitor further diplomatic developments closely, as any reversal in Iran-Oman talks could quickly restore the risk premium and spike Brent back toward recent highs.
Source: FXStreet