Crude prices drop under $84 as US and Iran revive diplomatic talks

Global oil prices plummeted on Tuesday, driven by renewed peace talks between the United States and Iran, which alleviated concerns over prolonged supply disruptions in the Middle East, with Brent crude oil prices slipping below $84 per barrel after exceeding $100 last week.

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The decline in oil prices was reflected in data from Oilprice.com, which showed Brent crude oil prices dropping from approximately $87 per barrel on Monday to around $83.92 on Tuesday, while West Texas Intermediate, the US benchmark, decreased to about $79 per barrel.

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The latest downturn in oil prices occurred as diplomatic efforts between Washington and Tehran gained momentum, easing concerns over a prolonged closure of the Strait of Hormuz, a vital global oil shipping route that handles around a fifth of the world's crude oil.

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Oil prices had previously surged following the US launch of strikes against Iran on February 28, aimed at preventing Tehran from acquiring a nuclear weapon, which led to a disruption in shipping in the Gulf and the closure of the Strait of Hormuz, sparking fears of a significant supply shock in the global energy market.

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The Strait of Hormuz was reopened last month after the US and Iran agreed to a ceasefire, but it was reclosed recently due to an exchange of strikes between the two countries, although fresh developments on Tuesday indicated possible progress towards reopening the waterway.

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Meanwhile, Iran proposed a temporary arrangement to Oman to reopen the Strait of Hormuz, under which one direction of maritime traffic would pass through Iranian waters, while part of the opposite route would transit Iranian territory, according to Reuters.

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Iran's Deputy Foreign Minister, Kazem Gharibabadi, stated that Tehran rejected Oman's proposal for an equal division of transit routes, citing concerns that such an arrangement failed to address Iran's security concerns pending the achievement of long-term regional stability.

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Gharibabadi warned that the Strait of Hormuz would remain closed if Muscat rejected Iran's proposal, adding that Iran had never recognized the southern shipping route along Oman's coast, as the prospect of renewed oil flows through the strategic waterway helped calm markets.

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The prospect of renewed oil flows through the Strait of Hormuz contributed to a reversal of part of last week's sharp rally, as US President Donald Trump stated that negotiations with Iran were progressing well, but warned that Washington was prepared to resume military action if diplomacy failed.

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Speaking in an interview with Fox News on Tuesday, Trump expressed his preference to avoid further strikes, but threatened to target Iran's key infrastructure, including power plants, bridges, and the underground "Kolang Mountain" nuclear facility, if no agreement was reached.

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Trump claimed that he could disable all of Iran's power plants in one day, leaving around 91 million people without electricity and without bridges, but emphasized his preference to avoid such action if possible, as he also claimed that most of Iran's major bridges could be destroyed "in under two hours".

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Trump stated that Iranian officials understood the consequences if negotiations broke down, as he asserted that Washington would no longer tolerate what it viewed as violations of agreements reached with Tehran, referring to a memorandum earlier signed between both countries.

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Ahead of a meeting with Israeli Prime Minister Benjamin Netanyahu at the White House, Trump dismissed suggestions that he required Israeli intelligence regarding the "Kolang Mountain" facility, insisting that the US already had complete knowledge of the site.

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Trump further claimed that previous American strikes had significantly degraded Iran's nuclear programme by hitting facilities in Natanz, Fordow, and Isfahan during last year's conflict, warning that the underground facility would also be targeted if negotiations failed.