Oil prices climb as Strait of Hormuz reopening terms face scrutiny

Oil prices edged higher on Friday as markets digested reports of a tentative agreement to reopen the Strait of Hormuz, a critical chokepoint for global crude shipments. Traders remained cautious, with the deal's exact terms and enforcement still unclear.

The rise came despite signals from Washington that a broader resolution with Tehran could be nearing. President Donald Trump said the conflict would end "pretty soon," while officials from Iran, the United States and Oman described progress toward a formal arrangement.

Hormuz deal takes shape

Reports from regional media indicated that Iran and Oman have agreed to reopen the strait for a 60-day period, a move that could ease supply disruptions that have rattled markets for weeks. The waterway, through which roughly a fifth of global oil passes, has been a focal point of tensions since hostilities escalated.

Oman has emerged as a key intermediary, hosting talks between Iranian and American officials. The sultanate's role underscores its history as a diplomatic bridge in the Gulf, though the specifics of the proposed deal—including verification mechanisms and guarantees—have not been publicly detailed.

What each side wants

Analysts point to divergent priorities among the parties. Iran seeks relief from sanctions and a restoration of its oil exports, while the United States wants assurances that shipping lanes remain secure and that Tehran will not use the strait as leverage in future disputes.

Oman, for its part, aims to stabilise regional trade and maintain its position as a neutral facilitator. The 60-day window is seen as a confidence-building measure, allowing both sides to test compliance before committing to a longer-term arrangement.

Market jitters persist

Despite the diplomatic momentum, traders remain wary. Past announcements of de-escalation have sometimes unravelled, and the logistics of reopening the strait—including minesweeping, naval escorts and insurance for tankers—are yet to be clarified.

The price uptick reflects this uncertainty. A swift reopening could release pent-up supply and pressure prices lower, but any delay or breakdown in talks would likely reignite fears of shortages. Insurers have been reluctant to cover vessels in the region, adding to freight costs and complicating the return of normal traffic.

Trump's remark that the war would end "pretty soon" has been interpreted in some quarters as a signal of an imminent breakthrough, though no formal ceasefire has been announced. The White House has not elaborated on the timeline.

Regional fallout

The conflict has already disrupted shipping and raised energy costs globally. India, a major importer of Gulf crude, has been watching developments closely, with domestic fuel prices sensitive to any volatility in the region.

The 60-day reopening plan, if implemented, would offer temporary relief. But analysts caution that the underlying political tensions remain unresolved, and the strait could again become a flashpoint if negotiations stall.

For now, the market is in a wait-and-see mode. The coming days are likely to bring more clarity on whether the deal holds, how quickly traffic can resume, and whether both sides honour their commitments.

What happens next depends on the talks in Muscat, where Omani mediators continue to shuttle between the parties. An agreement to extend the reopening beyond 60 days would signal lasting progress; a collapse would send oil prices sharply higher.