Hello Power Up readers,
Oil prices have drifted lower this week, slipping below $90 a barrel, as the market’s attention shifts to hopes for a diplomatic breakthrough to end the six-month long Middle East conflict.
Qatar’s prime minister will visit Tehran on Thursday, three days after the visit by Pakistan’s army chief. The two countries have served as back-channel negotiators between Iran and the United States throughout the war, playing a key role in securing the June ceasefire deal that led to a brief pause in hostilities. The revived diplomatic efforts come just days after Iran and the U.S. exchanged harsh words over Washington's promise to increase economic pressure on Tehran by targeting its trade partners with sanctions.
At the same time, Iran and Oman are working on an agreement to share oversight of the Strait of Hormuz, the vital waterway that has become the epicentre of the conflict. Iran has nevertheless said an agreement with Oman would not equate to the reopening of the strait, which would depend on talks with the U.S.
In a harsh reminder that tensions remain high, on Thursday an unidentified projectile hit a tanker in the strait for the first time in over a week.
Meanwhile, oil flows through Hormuz have fallen to a three-month low, with just 5 million barrels per day transiting on Monday, according to the latest ship-tracking data, despite U.S. claims last week of a sharp recovery in volumes. Before the war, the strait carried roughly 20 million bpd of oil.
These confusing signals create a strong feeling of déjà vu. Although the heavy military phase of the war has ended for now, Washington and Tehran seem no closer to resolving their core disputes, including the re-opening of Hormuz, let alone the goals the White House set out when the conflict began on February 28.
Indeed, six months into the war, the conflict is hardening into a stalemate that could last well into 2027, with energy markets held hostage, inflation elevated and neither side willing – or able – to back down. More on this below.
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