Oil prices have plummeted: the market is awaiting talks between the U.S. and Iran
21 April 12:19
Global oil prices fell on Tuesday following a sharp spike the previous day. The main reason is the expectation that talks between the U.S. and Iran will take place this week after all, which could pave the way for increased supplies from the Middle East. This was reported by Reuters, according to "Komersant Ukrainian"
Against this backdrop, investors began to partially lock in profits following yesterday’s sharp rise in prices.
As of the morning of April 21, Brent futures fell to $94.44 per barrel, and the May WTI contract to $87.95. The more actively traded June WTI contract also fell in price—to $86.18 per barrel.
Why oil prices fell after yesterday’s surge
The day before, the market surged sharply due to renewed tensions around the Strait of Hormuz. Brent jumped 5.6% on Monday, and WTI rose 6.9% after Iran once again blocked the strait and the U.S. seized an Iranian cargo ship as part of the blockade of the country’s ports.
However, by Tuesday, sentiment had shifted. Investors bet that a diplomatic solution remains a realistic possibility for now, and that negotiations between Washington and Tehran could either extend the current ceasefire or bring the parties closer to a broader agreement. It was precisely these expectations that put downward pressure on prices.
What is known about the U.S.-Iran negotiations
According to Reuters, Iran is considering participating in peace talks in Pakistan. This comes amid Islamabad’s attempts to secure an easing of the U.S. blockade. At the same time, the Iranian side emphasizes that a final decision has not yet been made, and further contacts are complicated by statements regarding U.S. violations of the ceasefire.
Citi analysts believe that either a memorandum could be signed this week or the current ceasefire could be extended. But they also warn: if the talks fail, the market will quickly price in a scenario of prolonged supply disruptions again.
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Why the Strait of Hormuz is so important
The Strait of Hormuz is one of the main routes for global oil trade. About 20% of the world’s oil supplies typically pass through it. That is why any disruptions in this corridor immediately impact the global energy market.
Reuters reports that shipping through the strait remained limited on Monday. If this situation drags on for at least another month, Citi estimates that total losses could reach 1.3 billion barrels, and prices in the second quarter of 2026 could jump to $110 per barrel.
What this means for the global oil market
Even despite the current decline in prices, the market remains extremely nervous. ING analysts have explicitly stated that market participants may be underestimating the scale of the current supply shock. In their view, optimism regarding the negotiations is currently overshadowing the reality of supply disruptions.
Separately, Societe Generale noted that price increases due to the crisis surrounding the Strait of Hormuz have already reduced oil demand by approximately 3%. In other words, high prices have begun to hit not only consumers but also the market itself, suppressing demand.
What risks remain
The main risk is a breakdown in negotiations between the U.S. and Iran. If the parties fail to make progress this week, the market could return to aggressive growth. An additional source of nervousness is that Kuwait has already declared force majeure on oil supplies due to the blockade of the strait.
Another important signal is the assessment that a full normalization of supplies may not occur until the end of 2026. This means that even if tensions ease slightly in the coming days, the market will remain in a state of heightened turbulence for a long time to come.
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