Oil Price Today (August 26): Crude oil tanks 6% in two days to hover near $85. What’s behind the decline?

Oil prices fell 3% on Wednesday, extending losses from the previous session, as fresh hopes emerged that the Strait of Hormuz could reopen after Iran said it had resumed talks with neighbouring Oman on managing the strategic waterway.

The market continues to react to developments surrounding navigation through the Strait of Hormuz, and hopes for progress in talks between Iran and Oman have triggered selling.

Crude oil price on August 26

Brent crude futures were down $2.35, or 2.65%, at $86 a barrel, while U.S. West Texas Intermediate crude futures fell $1.94, or 2.36%, to $80.42. Both benchmarks had declined more than 3% on Tuesday.


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Iran said it had restarted talks with Oman over managing the Strait as it comes under heightened economic pressure from the U.S. President Donald Trump.

The two countries have held on-and-off talks for weeks over controlling traffic through the waterway, which accounted for one-fifth of global oil and liquefied natural gas shipments before the war began in February. Iran and Oman said on Tuesday that they had discussed "a joint temporary navigational corridor" through the Strait and agreed to clear it of mines.

On Monday, Washington expanded sanctions aimed at cutting off Iran's economic lifeline and threatened to punish countries that continue to do business with Tehran, though it said penalties would not be imposed immediately.

Separately, an oil tanker was hit by an unidentified projectile and disabled on Tuesday about 9 nautical miles (17 km) northeast of Oman's Ash Shishah, which lies at the entrance to the Strait, the United Kingdom Maritime Trade Operations said.

Where are prices headed?

The duration of the disruption will be a key factor for crude prices. JPMorgan estimates that each additional month of disruption could add around $7 to $8 a barrel to Brent prices. If the disruption continues for three months, the bank expects average monthly Brent prices to reach around $114 a barrel.

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Goldman Sachs has also warned that Brent could climb to $120 a barrel if shipping disruptions through the Strait of Hormuz, the world's most important oil transit route, persist.

At the same time, Goldman Sachs expects tensions in the Middle East to eventually ease under its base case. The bank forecasts Brent to average $80 a barrel in the fourth quarter and $75 a barrel next year. It said risks remained tilted to the upside, with disruptions through the Strait of Hormuz and the Red Sea potentially lasting longer than expected.

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