Iran's diplomatic efforts in Oman are showing initial success, with traffic in the Strait of Hormuz quietly recovering to 75% of pre-war levels.

Oil flows through the Strait of Hormuz are quietly picking up, and the optimism brought about by diplomatic efforts is eroding the oil price premium that had previously accumulated due to the risk of war.

Brent crude futures fell to an intraday low of $86.22 a barrel on Thursday before recovering to above $88, bringing the week down 6.3%.

Reports indicate that Kuwait and Qatar are resuming crude oil exports through this crucial maritime chokepoint, with daily oil shipments through the strait recovering to approximately 75% of pre-war levels, significantly easing market concerns about supply disruptions. Meanwhile, according to CCTV News, a senior Iranian source stated on the 26th that Iran and Oman are "still negotiating details" regarding an agreement concerning the Strait of Hormuz. Iran had earlier this month indicated that an agreement was nearing completion.

This situation marks a significant reversal since Brent crude surged to over $120 a barrel at the end of April, but analysts warn that the core differences between the United States and Iran have not been resolved, and the energy crisis has spread from the crude oil supply side to the refined oil market, with diesel crack spreads remaining at historically high levels .

Transportation volume is rebounding rapidly, and multiple data points confirm the recovery.

According to Bloomberg, citing sources familiar with energy flows in the Gulf region, Kuwait and Qatar are currently shipping about 70% of their combined pre-war crude oil output of 2 million barrels per day. Overall , daily oil shipments via the Strait of Hormuz have climbed to 7 to 8 million barrels, a significant increase from about 4 million barrels in mid-July, equivalent to about 75% of pre-war levels.

London-based energy and shipping analysis firm Vortexa, in an independent report to its clients, offered a more optimistic figure, stating that the seven-day average of oil transit through the Strait of Hormuz has approached 10 million barrels per day.

Shipping research firm TankerTrackers first reported the increase in ship-to-ship (STS) transshipment activities on Tuesday. The firm stated on social media that at least 15 STS transshipment operations were simultaneously taking place in the Gulf of Oman that day, involving approximately 25 million barrels of crude oil and some refined products, originating from almost all countries in the region except Iran. According to Bloomberg, the UAE was the first country to resume crude oil transport via the Straits of Oman, subsequently diverting cargo to other vessels in the Gulf of Oman.

The diplomatic framework is beginning to take shape, and the market is starting to price in expectations of peace.

The core driver behind the recovery in shipping volumes is the emerging diplomatic framework between Iran and Oman. The two sides are reportedly consulting on establishing a "temporary joint maritime corridor" and working together to clear mines from the strait. Trump stated earlier this week that all mines had been cleared.

The market reacted strongly. Dennis Kissler, senior vice president of trading at BOK Financial Securities, said on Wednesday, "The oil market appears to be starting to price in a 'premature peace deal'."

However, analysts are cautious about whether this framework can be implemented. UBS analyst Justinus Steinhorst wrote in a research report, "The framework between Iran and Oman regarding a 'temporary joint maritime corridor' is depressing oil prices, but given the continued economic pressure from the US at the same time, it's hard to imagine Washington endorsing it ." The Trump administration and Tehran are currently deadlocked in seeking a solution.

Crude oil prices are under pressure, but the refined oil crisis continues to escalate.

The rebound in traffic in the Strait of Hormuz largely explains the decline in Brent crude oil prices from over $120 at the end of April to the current $80 range. Traders are gradually closing out long positions previously established due to war risk premiums.

However, the nature of the energy crisis is changing . Damage to Middle Eastern refining facilities, coupled with Ukraine's continued attacks on Russian refineries, has shifted the focus of the crisis from crude oil supply to refined product shortages. US diesel crack spreads remain above $90 per barrel, having briefly touched a record high of $100 per barrel last week, and global diesel inventories continue to run low.

This means that even if crude oil flow in the Strait of Hormuz recovers further, the pressure on the refined oil market will be difficult to alleviate in the short term, and the structural tension in the energy market has not yet dissipated.

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