New york: Oil prices fell on Tuesday, reversing earlier gains after US Treasury Secretary Scott Bessent indicated that a deal could be finalized with Tehran by Wednesday to reopen the Strait of Hormuz to shipping traffic. This development comes after five months of blockage affecting Gulf oil and gas tankers, which has had significant consequences for global energy markets.
According to TRTworld.com, the renewed optimism surrounding the potential reopening of this vital waterway has bolstered stock markets. Wall Street opened higher, building on the Dow's record closing high from Monday. This rise in stock prices follows a tech-led rollercoaster ride last week, driven by concerns over the massive investments in artificial intelligence and the uncertain timeline for these investments to yield economic benefits.
In addition to geopolitical developments, a series of impressive US corporate earnings reports has contributed to market confidence. Notable earnings came from AI-data mining company Palantir and construction giant Caterpillar, suggesting that firms may be resilient against the volatility triggered by the US and Israeli strikes on Iran.
Despite these optimistic signals, investors remain cautious about the prospects of reopening the Strait of Hormuz. There have been previous announcements of imminent deals to end the US-Iran conflict that did not materialize. Tensions persisted on Tuesday when an unidentified projectile struck a cargo ship in the strait, even as US President Donald Trump expressed confidence that the waterway might reopen within hours. Treasury Secretary Bessent told CNBC, "I think there is a chance we may have a deal today or tomorrow to open the strait," highlighting the importance of this issue in ceasefire negotiations with Iran.
Market strategist Patrick Munnelly from Tickmill Group noted, "The market is now trying to price a more nuanced geopolitical path: lower risk of immediate military escalation, but no guarantee yet that the Strait of Hormuz returns to normal functioning."
The prolonged disruptions to global energy supplies have previously driven oil prices higher, benefiting oil majors like BP, which saw its profits more than double in the second quarter. Despite this, BP's shares fell nearly five percent as traders viewed the growth as expected. On the same day, Saudi Aramco reported a 44 percent surge in net profits.
The five largest Western energy companies-BP, Chevron, ExxonMobil, Shell, and TotalEnergies-collectively reported net profits of nearly $47 billion for the April-June period. Meanwhile, Lufthansa's share price dropped 11 percent after the German airline warned that fluctuating jet fuel costs would affect its full-year profit.
Traders are also keeping an eye on earnings from SpaceX, expected after the Wall Street close on Tuesday, and upcoming US jobs data, which could offer new insights into interest rate trends in the world's largest economy.