Key Takeaways:
- Iran publicly guaranteed safe Hormuz passage for Japanese ships for the first time
- WTI crude fell 8% to $87.60 this week as diplomatic hopes grew
- US Central Command guided about 70 vessels through the strait in three weeks
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Iran pledges safer Hormuz passage for Japan as oil prices slide 8%
Iran's pledge to ensure smoother Strait of Hormuz passage for Japanese vessels adds to signs the waterway is reopening, with WTI crude already down 8% this week.
Iran's promise of smoother Strait of Hormuz passage for Japanese ships adds to mounting evidence the waterway is reopening, with WTI crude sliding 8% to $87.60 a barrel this week.
"Though US forces are not escorting, we continue to communicate and coordinate with commercial ships seeking to freely and safely transit the Strait of Hormuz," Captain Tim Hawkins, a Central Command spokesman, said in a statement.
US Central Command has guided about 70 commercial vessels through the strait over the past three weeks, most with transponders off to avoid detection. The crossings — averaging three a day — remain a fraction of the more than 100 ships that transited daily before the US-Israeli strikes on Iran in late February. The NZD/USD exchange rate rose to 0.5990 from 0.5840 last week as the dollar weakened alongside falling oil prices.
The strait handled about a fifth of the world's oil before the conflict, and its partial reopening could ease energy inflation concerns that have driven central bank policy expectations. Prediction markets now price a 21.5% probability of crude reaching a new all-time high by September, down from elevated levels during peak hostilities.
The Iranian president's statement specifically addressed Japanese vessels, marking the first time Tehran has publicly guaranteed safe passage for a specific nation's ships since the conflict began. The pledge follows weeks of stalled negotiations between the US and Iran, with President Donald Trump recently toughening the terms of a framework deal, according to US officials.
Of the 895 crossings recorded from March 1 to May 19, just over half used the route close to Iran's coast, suggesting many shipowners and governments are still coordinating with Tehran, according to Kpler, a maritime data company. About 40% took an unknown or "dark" route with transponders switched off.
Oil's Risk Premium Unwinds
The decline in WTI from $94.60 a week ago reflects speculative unwinding of long positions built up over the past three months, according to market analysts. The last time oil prices traded above $90 for an extended period during a Middle East conflict — following the 2019 attacks on Saudi Aramco facilities — Brent crude fell 15% within two weeks after supply returned. A similar pattern may be emerging, with hedge funds selling futures to lock in profits.
Currency Markets Reprice the Peace Dividend
The US dollar has weakened in tandem with oil, with the DXY index expected to fall well below 98 if a deal is finalized, according to currency strategists. The NZD has been a primary beneficiary, breaking out of a three-month converging wedge pattern against the greenback. The New Zealand dollar's gains reflect both the weaker USD and the Reserve Bank of New Zealand's hawkish pivot last week, when it signaled rate increases ahead.
This article is for informational purposes only and does not constitute investment advice.
[1] Iranian President: Will Ensure Smoother Passage of Japanese Ships Through the Strait of Hormuz[2] U.S. Military Is Quietly Guiding Ships Through the Strait of Hormuz[3] US military quietly guiding ships through Hormuz amid stalled negotiations[4] Oil prices rise amid US-Iran tensions despite Trump’s negotiation signals[5] Hooray for RBNZ transparency
