Full Breakdown
Oil Prices Stabilize as US-Iran Peace Talks Prompt Strait of Hormuz Reopening
7/5/2026, 12:13:50 AM
Prices Hold Steady as MoU Persists
On July 3, Brent closed at $71.72 a barrel (-0.11 %) and WTI at $68.47 (-0.32 %). Both benchmarks were little changed as U.S. markets closed for Independence Day. Traders linked the shift to the US-Iran MoU that keeps the Strait open.
Interim Accord After February Conflict
The Strait of Hormuz, supplying one-fifth of global oil before the February 2026 U.S.–Israeli war, was shut after Iranian attacks on merchant ships. An interim MoU in early June permits shipping, though late-June strikes revived tension.
Production Surge, Flows, Contango
Kuwait’s output rose to 1.65 million bpd in June from 580,000 bpd in May, and five supertankers carrying 10 million barrels of Saudi crude have passed the Strait since the MoU. Brent entered contango; the spread turned negative July 1.
Official Responses
Citi analysts said the dealmaking is fragile but ongoing, with incentives to breach the MoU limited. Commerzbank noted optimism about Hormuz reopening eases price pressure. ING observed rising oil flows compressing Brent curve, reinforcing contango. PVM’s Varga warned a price rebound depends on absorbing stranded oil and matching production gains to transit.
Opposition
Analysts stress unresolved disputes over shipping management and transit fees keep the MoU fragile, and strikes underscore reversal risk.
Ground Reports
Supertankers at Saudi’s Ras Tanura port exited the Strait; Kuwait’s output surge shows OPEC response. Saudi Aramco’s shift to spot pricing aims to speed Asian sales.
Conflicts & Gaps
Reuters listed Brent at $71.72, down 8 cents; Tribune reported $72.26, up 46 cents. Weekly trends differ: Reuters shows a 0.3 % decline, Tribune a 0.35 % rise. First negative Brent-to-six-month spread dated July 1 (Reuters) versus June 24 for the front-month-to-one-month spread (Tribune). No data confirm the exact dates.
Quotes
- “The U.S.-Iran dealmaking process remains fragile but continues for now, as the question of Strait of Hormuz tolls and administration remains contentious.” — Citi analysts
- “We expect the memorandum of understanding to remain, not because trust has suddenly been established, but because incentives for either side to violate the agreement appear limited.” — Citi analysts
- “A sustained recovery in crude prices is more likely to materialise once the oil currently stranded on tankers and held in storage has been absorbed by the market, and if the recovery in production proves insufficient to offset volumes transiting the Strait of Hormuz.” — Tamas Varga, PVM analyst
- “It's a case of guarded optimism, with the market wanting to believe the peace efforts will hold, but it’s still hedging its bets until it sees real evidence on the water.” — Tim Waterer, chief market analyst, KCM Trade
Outlook
MoU negotiation window ends in August; Hormuz traffic and Gulf output could cement contango, while any breach may reverse July price gains.
