5 minEconomy
Oil Prices Fall as Gulf-Iran Talks Raise Hopes for Hormuz Deal
Brent crude dropped 2.9% to $104.52 as Gulf states prepare to meet Iran's foreign minister, while Saudi Arabia faces Houthi threats to its Red Sea pipeline and receives only limited U.S. support.
Oil prices fell sharply after reports that Gulf Arab states will hold a rare meeting with Iran's foreign minister, raising the prospect of a diplomatic breakthrough over the Strait of Hormuz. Brent crude tumbled 2.9% to $104.52 a barrel, reflecting market hopes that the world's most important energy chokepoint could soon see improved traffic.
Foreign ministers from the Gulf Cooperation Council — Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman — are set to meet their Iranian counterpart on Monday, according to people familiar with the plans. It would be the first such gathering since the United States and Israel launched their war on Tehran. The meeting comes as Oman and Iran seek support for a deal they have been crafting to temporarily manage shipping through the strait.
The Strait of Hormuz has been at the center of a tense standoff. A U.S. naval blockade is preventing Iran from exporting oil through its ports, while Iranian drone and missile attacks have kept other exporters from returning to prewar levels. The U.S. military has been helping non-Iranian oil move through the strait, bringing regional exports to roughly two-thirds of their prewar volume. That partial recovery has weakened Iran's ability to use the waterway as political leverage, even as the blockade continues to crush Iran's economy.
An agreement on the Iran-Oman shipping scheme would not fully reopen the strait. Tehran has insisted that Washington must first fulfill the terms of their earlier ceasefire deal reached in June. According to a source cited by the Financial Times, Iran and Oman aim to get the GCC on board in order to pressure the U.S. to lift its blockade on Iranian ports. GCC states, for their part, want any arrangement to be temporary and to ensure ships can move in and out. They remain wary of anything that would recognize Iranian control over Hormuz.
To regain the upper hand, Iran has launched fresh missile salvos at U.S. bases in the region, attacked U.S. warships and helped its Houthi allies in Yemen seize territory near the Bab al-Mandab Strait, which links the Red Sea and the Arabian Sea. After Iran closed the Strait of Hormuz, Bab al-Mandab became a vital bypass for Saudi Arabia, which diverted oil from the Gulf to the Red Sea via its East-West Pipeline. But the Houthis have reportedly attacked the pipeline and Saudi tankers in recent days.
Saudi Arabia is finding little support from its allies as it confronts the threat to its oil exports. Crown Prince Mohammed bin Salman called President Donald Trump twice on Thursday to request U.S. strikes against the Houthis, but was turned down, according to Axios. U.S. officials said the Trump administration will instead provide intelligence on the Houthis and targeting data. American forces will remain focused on Iran and the Strait of Hormuz, avoiding an additional front.
Saudi Arabia also has a defense pact with Pakistan, which has deployed troops near the Saudi border with Yemen. But Pakistan depends on energy shipments that transit through both the Strait of Hormuz and the Red Sea, making Islamabad reluctant to antagonize Iran. Officials there are worried the Houthi threat could draw Pakistan into a war. Pakistan's foreign ministry has said no military response to the Houthi attacks is being discussed. According to Reuters, Pakistan's army chief stressed diplomatic efforts to de-escalate across all fronts in a call with Iranian Foreign Minister Abbas Araqchi on Thursday.
«Pakistan is trying to keep a low profile in the Saudi-Houthi conflict because Pakistan's own stakes are high,» a Pakistani government official told Reuters. «It does not want to spoil relations with Iran.»
The combination of diplomatic signals and unresolved security threats leaves oil markets caught between hope and risk. A successful GCC-Iran meeting could ease pressure on prices, but any further attacks on Saudi infrastructure or shipping would quickly reverse that trend. For now, traders are watching both the negotiating table and the waters off Yemen.
