Oil prices continued their downward trend on Thursday as investors responded to encouraging developments in diplomatic negotiations between the United States and Iran, raising expectations that energy exports through the Strait of Hormuz could continue to normalize.

Brent crude futures declined approximately 0.8% to trade below $71 per barrel, while U.S. benchmark West Texas Intermediate (WTI) crude fell about 1.1%, slipping below $68 per barrel. Both benchmarks have now retreated to levels seen before the escalation of the Middle East conflict earlier this year.

Diplomatic Talks Support Market Sentiment

The latest decline followed comments from Qatar, which is hosting negotiations between U.S. and Iranian officials in Doha. Although the first round of discussions concluded without a formal agreement, Qatar’s foreign ministry reported that negotiators had made “positive progress” and that additional talks are expected following the July 9 funeral ceremonies for former Iranian Supreme Leader Ayatollah Ali Khamenei.

The prospect of continued diplomacy has reduced immediate concerns over prolonged disruptions to global oil supplies, easing the geopolitical risk premium that had driven crude prices sharply higher during the conflict.

Strait of Hormuz Traffic Continues to Recover

A key factor behind the recent decline in oil prices has been the gradual recovery of shipping activity through the Strait of Hormuz, one of the world’s most strategically important energy corridors.

According to shipping intelligence firm Kpler, 34 vessels successfully transited the waterway on Wednesday, evenly divided between inbound and outbound voyages. Market participants are closely monitoring inbound tanker activity, as it provides insight into future export capacity once inventories currently stored within the Persian Gulf are depleted.

The increase in vessel movements suggests that global oil flows are steadily improving after months of severe disruption.

Iran Maintains Firm Position

Despite ongoing negotiations, tensions remain unresolved.

Iran’s military leadership reiterated that the Strait of Hormuz remains under Iranian control and warned that any future U.S. military intervention would trigger a rapid response.

Iran has also continued to support discussions with neighboring Oman regarding potential administrative oversight or transit fees for vessels using the strait, a proposal that U.S. officials have rejected, emphasizing the international legal principle of freedom of navigation.

While military activity has paused, markets continue to monitor political developments closely as negotiations progress.

JPMorgan Sees Markets Returning to Normal

Natasha Kaneva, Head of Commodities Research at JPMorgan, observed that crude prices have effectively returned to pre-war levels despite more than 100 days of conflict that temporarily disrupted one of the world’s busiest shipping routes.

The rapid decline in prices reflects growing market confidence that supply disruptions will remain limited if diplomatic efforts continue to advance and shipping volumes normalize.

Lower Oil Prices Benefit Consumers

Falling crude prices are beginning to translate into lower fuel costs for consumers, particularly in the United States.

According to AAA, the national average gasoline price declined to $3.83 per gallon on Thursday from approximately $4.29 per gallon one month earlier.

The decline comes ahead of the busy Fourth of July travel period and provides some relief to households after months of elevated fuel costs driven by geopolitical uncertainty.

Outlook

Oil markets remain highly sensitive to developments in U.S.-Iran negotiations. While improving diplomatic relations and increasing tanker traffic have reduced supply concerns, the situation remains fragile as Tehran continues to assert control over the Strait of Hormuz. Investors are expected to remain focused on upcoming negotiations, shipping activity, and regional security developments as key indicators for the direction of global energy prices.