Oil breaks $100: Iran's 7-day Hormuz offer and Saudi pipeline restart

Oil prices tumbled below $100 a barrel on Tuesday as two supply-side developments collided: Iran signaled it could reopen the Strait of Hormuz within seven days, and Saudi Aramco resumed flows through its East-West pipeline at a reduced rate. Brent, the benchmark for two-thirds of global crude, dropped 2.64% to $97.69 a barrel at 3:09 PM UAE time, while West Texas Intermediate fell 3.20% to $89.41. Gasoline futures slid 2.1% and heating oil declined 3.1%, while the S&P GSCI commodity index eased 1.5%. The drop marks the first time Brent has traded below the psychological $100 threshold since September 9, when Saudi shipments through Hormuz began rising sharply.

The catalyst for the retreat came from a senior Iranian official, who told Reuters that Tehran is prepared to reopen the Strait of Hormuz within a week if the US eases military pressure and lifts its blockade of Iranian ports. Iran has also submitted a proposal to Washington through mediators, raising hopes of a diplomatic breakthrough after nearly seven months of disruption to one of the world's most critical energy corridors. Simultaneously, Saudi Aramco restarted its East-West pipeline on Tuesday at a reduced rate, according to three sources familiar with the matter, with crude exports from the Red Sea port of Yanbu expected to resume later in the day. The pipeline, which carries crude across the peninsula and bypasses Hormuz entirely, had been shut since September 13 after drone attacks damaged pumping infrastructure, halting loadings at Yanbu and forcing Aramco to cancel some cargoes to European customers.

The restart is a workaround, not a cure-all. Saudi Arabia has compensated by sharply increasing shipments through Hormuz itself. Saudi crude moving through the strait averaged 2.9 million barrels per day over the six days to September 18, up from about 700,000 bpd in August, according to JP Morgan analysts citing satellite data. Aramco also loaded roughly 14 million barrels of crude onto seven very large crude carriers in the Gulf on Sunday, per TankerTrackers.com data cited by Reuters. That surge in eastern exports pushed Brent below $100 on Monday for the first time since September 9. But the logistics remain complex: Saudi Arabia is now blending direct voyages through Hormuz with ship-to-ship transfers off the coast of Oman, mainly at Sohar in the Gulf of Oman. "Crude is loaded in the Gulf onto shuttle tankers, taken through Hormuz, then transferred ship-to-ship off Oman," explained Noureldeen Al Hammoury, chief market strategist at Equiti Group. "The long-haul VLCC picks up the cargo outside the strait and does not have to enter the Gulf."

Ana Subasic, trade risk analyst at Kpler, expects Saudi Arabia to continue increasing eastern exports while alternative lines remain constrained. "The scale will depend on how quickly partial pipeline capacity is restored and on security conditions around Hormuz," she said. That caution is warranted. Broader traffic through the strait remains severely constrained: only two visible commercial vessels passed through on Monday, versus about 125 a day before the war began on February 28, according to preliminary shipping data. The figures exclude vessels sailing with their Automatic Identification System transponders off. Two tankers were also attacked in the strait, underscoring that the risks have not disappeared even as diplomatic hopes build.

A sustained retreat in crude prices would offer real relief to policymakers confronting an energy-driven inflation shock. The Federal Reserve raised interest rates last week for the first time since 2023, lifting its benchmark to 3.75%-4% in a unanimous vote, joining the European Central Bank and the Bank of Japan in tightening policy. US retail diesel has already hit $6.50 a gallon, its highest level this year. Claudio Galimberti, chief economist at Rystad Energy, framed the dilemma: "The central bank moves this week are a rational response to an energy crisis that monetary policy cannot fix. Brent at $100 and diesel at $6.50 a gallon are already squeezing consumers. The key question now is whether this energy shock remains primarily inflationary or starts tipping into something that resembles a slowdown."

Traders are also positioning for Thursday's meeting between President Donald Trump and Chinese President Xi Jinping in Washington. The market is watching for any signal on secondary sanctions against buyers of Iranian crude and whether China, the world's largest importer, is willing to act as a swing consumer if diplomacy stalls. A diplomatic thaw would accelerate the slide below $100, but any misstep on sanctions or security could send prices right back through the ceiling.

For executives and boards, the immediate takeaway is that the energy complex remains a whipsaw: every headline from Hormuz or Riyadh moves the price, but the underlying supply structure is still fragile. The pipeline restart is partial, Hormuz traffic is a fraction of normal, and attacks remain a live threat. Companies with heavy fuel exposure should treat today's drop as a reprieve, not a resolution, and stress-test their cost assumptions against a rebound if talks collapse or infrastructure damage deepens.