Oil prices are set to plummet following a deal to resume traffic through the strategic Hormuz Strait, a key chokepoint in global oil supplies. The development is expected to lead to a sharp weekly drop in oil prices, with Brent crude forecast to fall by up to 5% this week. The Hormuz Strait, which connects the Persian Gulf to the Gulf of Oman, has been a crucial route for oil exports from Saudi Arabia and other Gulf states.
The deal, brokered by the United Arab Emirates, comes after months of tensions between Saudi Arabia and Iran over the strait. The agreement will allow ships to pass through the strait without disruption, increasing global oil supplies and putting downward pressure on prices. The Organisation of the Petroleum Exporting Countries (OPEC) expects global oil demand to increase by 2.2 million barrels per day in 2024, according to its latest forecast.
Analysts have warned that the deal could lead to a sharp correction in oil prices, which have been volatile in recent months. 'This is a major development that will have a significant impact on global oil markets,' said Fadel Gheit, an oil analyst with Oppenheimer & Co. 'The resumption of traffic through the Hormuz Strait will increase oil supplies and put downward pressure on prices.'
The news has been welcomed by oil consumers, who have been facing rising prices in recent months. 'This is a positive development for consumers, who will benefit from lower oil prices,' said a spokesperson for the UK's AA motoring organisation. 'However, it's worth noting that prices are still volatile and can change rapidly.'