Oil prices have dropped to their lowest levels since the beginning of the U.S.-Israel war on Iran, as hopes rise for progress toward a permanent peace agreement. The latest decline came after Qatar reported “positive progress” in indirect talks between the United States and Iran over the memorandum of understanding, or MoU, aimed at ending the conflict.
Brent Crude Drops Below $71 a Barrel
Brent crude fell by more than 1% on Thursday, slipping below $71 per barrel. This brought the international oil benchmark back to levels last seen before the war began.
As of 04:30 GMT, Brent futures for August delivery were trading at $70.82 per barrel. That was lower than any point since February 27, the day before the war started.
Following this decline, Brent prices are now down more than 38% from their post-war high of over $126 per barrel, reached on April 30.
Peace Talks Help Ease Oil Market Fears
The price drop followed comments from Qatar, a key mediator between Washington and Tehran. Qatar said U.S. and Iranian officials had made “positive progress” in indirect negotiations related to the MoU on ending the war.
U.S. President Donald Trump also described the discussions positively on Wednesday, saying the “denuclearisation of Iran is moving along well.”
These signals have encouraged markets to believe that the risk of further escalation may be easing, at least for now.
Analysts Point to Higher Gulf Oil Flows
Vandana Hari, founder of Singapore-based oil market analysis firm Vanda Insights, said prices have been pushed lower by a steady rise in oil flows from the Gulf and a cautiously optimistic geopolitical mood.
She said several major issues in the MoU remain unresolved, but both sides appear to have stepped back from direct confrontation over the temporary Strait of Hormuz transit arrangement for the time being.
Hari said crude prices may continue moving lower until the backlog of stranded oil barrels is cleared. She also warned that prices could even fall into oversold territory before the market stabilizes.
According to her, the real test will come after Gulf supply normalizes and markets need to reassess supply and demand conditions.
Strait of Hormuz Shipping Shows Early Recovery
Shipping through the Strait of Hormuz has shown tentative signs of improvement in recent days. The waterway is one of the world’s most important energy routes, carrying around one-fifth of global oil and liquefied natural gas trade during peacetime.
Traffic through the strait had fallen sharply after attacks on two commercial vessels on Thursday and Saturday.
According to MarineTraffic data, at least 40 vessels crossed the strait on Tuesday. That was up from 27 crossings on Monday and 22 on Sunday.
Maritime Traffic Still Far Below Normal
Despite the recent increase, shipping activity remains much lower than before the war.
Before the conflict, the Strait of Hormuz saw about 130 crossings per day. Current traffic is still far below that level because safety concerns remain high.
Although Iran agreed in the June 17 MoU to make its “best efforts” to help ensure safe passage for vessels, Tehran has continued to claim sole authority over movement through the strait.
Attacks on Commercial Vessels Remain a Concern
Since the war began, at least 49 attacks on commercial ships have been recorded in the Strait of Hormuz, according to MarineTraffic.
Most of these attacks were either claimed by Tehran or blamed on Iranian forces.
The continued risk to commercial shipping remains one of the biggest uncertainties for oil markets, even as diplomatic talks continue.
Oil Market Stability Still Uncertain
Neil Crosby, an oil market analyst at Sparta Commodities in Singapore, said Brent’s decline shows the market has some confidence that the worst of the fighting may be over. It also reflects the recent improvement in supply.
However, Crosby warned that it is too early to assume prices will remain at pre-war levels.
He said the political situation is not stable, and the oil market itself remains uncertain because of changing supply, demand and trade conditions.
According to Crosby, lower prices could encourage major global crude importers to return to the market, helping clear the current oversupply over time. Still, he said he does not believe the market is fully “out of the woods” yet.
Oil prices have fallen sharply as hopes grow for a breakthrough in U.S.-Iran negotiations and a possible permanent peace agreement. Brent crude has returned to pre-war levels, trading below $71 per barrel, after falling more than 38% from its April peak.
While rising Gulf oil flows and positive diplomatic signals have eased market fears, serious risks remain. The Strait of Hormuz is still operating far below normal levels, commercial shipping faces ongoing safety concerns, and several key parts of the MoU remain unresolved. For now, oil markets are calmer, but long-term stability will depend on whether diplomacy can hold and Persian Gulf supply can fully normalize.