Oil prices hold steady after selloff as hopes of Hormuz breakthrough lifts global market sentiment

OIL prices stabilised on Tuesday after tumbling about five per cent in the previous session, as markets assessed whether renewed diplomatic efforts between the United States and Iran could lead to the full reopening of the Strait of Hormuz and ease concerns over global energy supplies.

West Texas Intermediate (WTI) crude traded near US$80 per barrel, while Brent crude hovered around US$83.50 after both benchmarks posted steep losses on Monday as hopes grew that tensions in the Middle East could begin to subside.

Investor sentiment improved after United States President Donald Trump described his latest proposal for talks as Iran's final opportunity to reach an agreement and voiced confidence that the strategically vital Strait of Hormuz would soon reopen.

Tehran, however, disputed that account, insisting no direct negotiations with Washington were taking place and maintaining that its only ongoing discussions were with Oman on measures to increase shipping through the waterway.

Despite the contradictory statements, traders interpreted the developments as reducing the immediate risk of further disruption to global oil flows, triggering a sharp retreat in crude prices while supporting gains in global equities.

Oil also came under pressure from improving supply fundamentals.

Turkey and Iraq agreed to extend a key oil pipeline agreement by another year, preserving an important regional export route, while Kazakhstan resumed crude exports through the Caspian Pipeline Consortium following a temporary disruption.

Meanwhile, OPEC+ approved another modest production increase, completing the gradual reversal of output cuts first implemented in 2023 and further easing supply concerns.

The prospect of reduced geopolitical risk also fuelled optimism across financial markets, with the Dow Jones Industrial Average ending Monday at a record high as investors rotated back into equities.

In currency markets, the Japanese yen extended its gains against the US dollar, pushing the USD/JPY exchange rate to around 157.40 during early Asian trading as traders anticipated the possibility of further coordinated intervention by Tokyo and Washington.

Japan's Finance Minister Satsuki Katayama said Japan and the United States had jointly intervened in foreign exchange markets to support the yen and would not hesitate to take further action if necessary.

United States Treasury Secretary Scott Bessent likewise signalled Washington's willingness to intervene again, while President Trump described the coordinated move as "a signal of friendship."

The yen's strength contributed to renewed weakness in the US dollar, with the US Dollar Index slipping to around 99.8, its lowest level in seven weeks.

The dollar was also pressured by the Federal Reserve's latest policy decision to leave interest rates unchanged. While financial markets continue to expect a possible rate increase in September, investors viewed comments from Federal Reserve Chairman Kevin Warsh as suggesting less urgency to tighten monetary policy further despite persistent inflationary pressures.

Taken together, hopes of easing geopolitical tensions, stronger global oil supply and a softer US dollar encouraged investors back into risk assets, although uncertainty persists over whether Washington and Tehran can secure a durable agreement on the future of the Strait of Hormuz. - August 4, 2026