Brent crude tumbled to $71 per barrel on Thursday morning, hitting its lowest level since late February amid cautious signs of resumed flows through the Strait of Hormuz.
The US claimed crude flows through the strait had exceeded 10 million barrels per day, supported by American military presence in the region.
Oil exports from the UAE have also returned to pre-war levels, aided by logistical workarounds that bypassed the contested waterway.
Despite the price relief, geopolitical tensions between Washington and Tehran remain far from resolved, keeping investors across global markets on high alert.
The peace relief rally seen across markets in recent sessions ground to a halt after fresh tensions in the Middle East threatened to reignite full-scale conflict between the US and Iran.
Negotiations suffered a significant blow when Donald Trump’s envoys Steve Witkoff and Jared Kushner arrived in Qatar on Tuesday to meet mediators, but no direct talks took place.
Iran subsequently claimed there had been no plan for talks at all, directly contradicting the diplomatic framing coming out of Washington.
The Wall Street Journal reported that Trump had been briefed on proposals to return to war, but opted to continue pursuing a peaceful resolution for the time being.
The latest flare-up follows an exchange of fire between both sides since the end of last week, stemming from an Iranian drone attack on a cargo ship travelling through the Strait of Hormuz.
The US responded with retaliatory strikes on “military surveillance infrastructure, communications systems, air defence sites, drone storage facilities and minelayer capabilities”, escalating the confrontation significantly.
Iran has refused to relinquish control of the narrow waterway, with its deputy foreign minister Kazem Gharibabadi making the country’s position firmly clear.
“Hormuz is defined under Iran’s command, not Centcom. A military summit in Bahrain cannot establish legal order and security for the Persian Gulf,” Gharibabadi said.
The FTSE 100 is expected to open lower on Thursday as global equity markets absorb the combined pressure of diplomatic uncertainty and volatile energy prices.
Traders will be watching closely for any shift in the US-Iran diplomatic track, as even modest progress could trigger a sharp reversal in oil and equities alike.