Key Highlights

• WTI crude fell 1.48 percent to 67.564 dollars a barrel while Brent dropped 1.34 percent to 70.612 dollars, both marking a third straight session of declines.

• The UAE restored exports to over 3.9 million barrels daily, pushing total Hormuz flows past 10 million barrels per day.

• US crude stockpiles fell to their lowest level since March 2025 after twelve consecutive weeks of drawdowns.

• Peace talks in Qatar face delay until after July 4 due to funeral proceedings for Iran's former Supreme Leader.

Rapid Supply Recovery Drives Prices Toward Pre-War Levels

Crude oil prices declined for a third consecutive session on Thursday, with WTI falling 1.48 percent toward 67 dollars a barrel and Brent dropping 1.34 percent toward 70 dollars, both approaching levels last seen before the Middle East conflict began.

The primary driver behind the decline is a rapid expansion in maritime oil flows through the Strait of Hormuz. The United Arab Emirates has restored its exports to more than 3.9 million barrels daily, contributing to total daily flows through the strait surpassing 10 million barrels. Combined with ongoing emergency reserve releases and additional ad hoc Saudi sales directed toward Asian buyers, this supply surge has shifted the market into what analysts describe as a surplus condition.

Geopolitical Risk Persists Despite Improving Physical Flows

Even as physical oil supply normalizes, underlying geopolitical tension has not fully dissipated. Upcoming peace talks scheduled to take place in Qatar face delays tied to funeral proceedings for Iran's former Supreme Leader Ali Khamenei, which begin July 4, pushing substantive negotiations further into the month.

Tehran has continued to assert demands for maritime control over the strait, a position that remains unresolved despite improved shipping volumes. Separately, US President Donald Trump reiterated his administration's opposition to Iran acquiring nuclear weapons, signaling that broader diplomatic friction between Washington and Tehran persists independent of the oil market's near-term supply dynamics.

Falling Prices Contrast With Tightening US Inventories

The decline in oil prices presents a notable contrast with domestic inventory data, which showed total US crude stockpiles falling to their lowest level since March 2025 following twelve consecutive weeks of drawdowns. This divergence suggests that global supply normalization, rather than domestic US supply and demand balances, is the dominant factor currently pressuring prices lower.

Continued Hormuz flow increases could extend the current surplus condition and keep prices under pressure in the near term, particularly if Saudi ad hoc sales to Asia persist alongside emergency reserve releases. However, any disruption to the fragile diplomatic process, including delays to the Qatar talks or renewed friction over Iran's strait control demands, could reintroduce volatility. Whether the current oversupply proves durable or temporary is likely to depend heavily on how negotiations progress once funeral proceedings conclude.

Conclusion

Oil markets are adjusting to a rapid normalization in Middle East supply flows, with both WTI and Brent extending declines toward pre-war price levels. While the physical market has moved into surplus territory, unresolved geopolitical friction, including Iran's continued assertions over the strait, suggests the underlying risk premium has not been entirely eliminated. The coming weeks, particularly the resumption of peace talks after July 4, are likely to prove influential in determining whether prices stabilize at current levels.