Oil prices declined sharply after US Treasury Secretary Scott Bessent said Washington and Tehran were engaged in discussions that could lead to an agreement restoring "freedom of movement" through the Strait of Hormuz. The remarks eased market concerns over potential disruptions in one of the world’s most important oil shipping routes, leading investors to reassess geopolitical risks affecting global energy supplies.

Speaking on CNBC’s Squawk Box, Bessent said negotiations with Iran were progressing and suggested that a possible agreement could be reached within days. He indicated that a deal could allow commercial vessels to move more freely through the strategic waterway, helping reduce uncertainty surrounding oil shipments from the Gulf region. However, details of the discussions and the potential agreement were not immediately disclosed.

Following Bessent’s comments, US crude oil futures dropped nearly 4 per cent, falling below $77 per barrel. The decline reflected market expectations that a diplomatic breakthrough could reduce the possibility of further escalation and limit risks to global oil supplies. Traders had been closely monitoring developments around the Strait of Hormuz due to its importance in international energy trade.

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When asked whether Iran would be allowed to impose charges or tolls on commercial vessels passing through the waterway, Bessent said the proposed arrangement would focus on ensuring unrestricted passage. He acknowledged that the security situation remained uncertain but noted that shipping activity had continued despite recent tensions in the region.

The Strait of Hormuz is a vital maritime route through which a significant portion of the world’s oil exports passes, making any disruption a major concern for energy markets. Previous tensions in the region have contributed to volatility in crude prices, with investors closely following diplomatic efforts aimed at preventing further conflict.

The latest comments from the US Treasury Secretary have provided temporary relief to oil markets, though analysts continue to watch the outcome of US-Iran discussions and the broader geopolitical situation. A successful agreement could ease supply concerns, while a breakdown in negotiations may renew pressure on energy prices.

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