Oil extends losses amid Strait of Hormuz reopening hopes

August 27, 2026 (MLN): Oil prices declined on Thursday, extending their recent losing streak amid growing expectations that diplomatic efforts involving Iran could pave the way for the reopening of the Strait of Hormuz and ease supply disruptions caused by the Middle East conflict.

Currently, Brent crude futures is up, 0.66%, at $87.51 per barrel, according to data by Mettis Global.

West Texas Intermediate (WTI) crude futures is down by $1.09, or 1.35%, to $81.89 per barrel by [09:40 am] PST.

Iran and Oman are reportedly finalizing an arrangement to manage the strategically vital waterway, according to a senior Iranian source.

Iran’s Revolutionary Guards had earlier indicated that the two countries had reached an understanding on jointly controlling the strait, which serves as a key export route for major Gulf oil producers.

Before the U.S.-Israeli war against Iran began on February 28, the Strait of Hormuz handled oil and natural gas shipments equivalent to nearly one-fifth of global consumption.

Since Iran moved to restrict access to the waterway, flows have fallen to around one-quarter of their pre-war levels, according to ship-tracking data.

Adding to hopes of a diplomatic breakthrough, Qatar’s prime minister is scheduled to visit Iran on Thursday to revive talks aimed at ending the conflict, which is approaching its sixth month.

The U.S. has also suspended attacks on Iran for about a month while increasing economic pressure on Tehran, raising expectations among investors that disruptions to Gulf energy supplies could eventually ease.

However, significant differences remain between the opposing sides, while Iran has continued targeting shipping in the Gulf and the Strait of Hormuz to reinforce its control over the critical waterway.

Iranian officials have also maintained that the strait would remain closed unless the U.S. fulfills conditions linked to an interim ceasefire agreement reached in June that later collapsed.

Meanwhile, the prolonged Middle East conflict and the Russia-Ukraine war are tightening global diesel supplies. Damage to refineries in the Middle East, combined with Ukrainian strikes on Russian refining facilities, has reduced fuel exports from major producing regions.

The impact is increasingly visible in inventory data. The U.S. Energy Information Administration reported that distillate inventories, including diesel and heating oil, fell by 2.2 million barrels during the week ended August 21 to 103.4 million barrels.

According to Hynes, this marks the lowest level of distillate inventories ever recorded for this time of year, highlighting persistent supply concerns even as expectations of a reopening of the Strait of Hormuz weigh on oil prices.

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