U.S. oil plunges below $70 as ships keep crossing Strait of Hormuz

U.S. oil plunged, erasing nearly all its gains made during the war, as vessel traffic through the Strait of Hormuz continued to rise and as investors increasingly expect the market to be oversupplied with Persian Gulf exports rebounding sharply.

Brent crude slipped 4.3% to settle below $72 a barrel, and West Texas Intermediate dropped 3.7% to close near $69 on Friday. WTI was hovering near the lowest levels since late February, when the U.S. and Israel launched the war against Iran.

Global oil markets are flashing signs of a glut in the near term as much of the Middle Eastern supplies that were cut off to the world during the war return to the market. The so-called contango in Brent futures, a signal of oversupply, widened on Friday to the biggest since 2023.

Ships have been openly transiting Hormuz following early progress toward a lasting agreement to end the U.S.-Iran war, adding millions of barrels to the global market.

Crucially, Saudi Arabia is beginning to load tankers again at its key Ras Tanura terminal inside the Persian Gulf, a sign of the continued ramp up in output in the region as overall exports are now at about 75% of prewar levels, according to Bloomberg calculations.

The bearish supply factors helped erase a Thursday rally that saw prices rise more than 2% after the container ship Ever Lovely was struck by an unknown projectile while sailing southeast of Oman. Prices remained lower even after U.S. President Trump accused Iran of violating a ceasefire by shooting drones at ships in Hormuz.

Meanwhile, the International Maritime Organization said it was looking to restart a program evacuating ships from the Persian Gulf.

“Crude remains under significant pressure as the bearish narrative continues to center on improving flows through the Strait of Hormuz,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “While transit numbers appear somewhat lower following yesterday’s attack on a vessel, traffic has not stopped entirely.”

The attack on Thursday threatened the fragile confidence of shipowners and crews, but ships continued to transit through the narrow corridor on Friday.

Two key exit routes through Hormuz have emerged because the normal one through the middle is thought to have been mined. One is near Iran, while the other hugs Oman’s coastline and is protected by the U.S. Iran’s Persian Gulf Strait Authority said Thursday that any transit happening in routes outside its framework would not be protected by “safe-passage guarantees.”

It’s possible that other constraints will persist around the strait. Oman has told European officials that transiting ships through Hormuz may have to be charged some fees, people familiar with the plans said.

Other hurdles to ramping up flows are emerging, too. Persian Gulf producers have been rapidly raising output, but are finding it difficult to secure tankers to ferry the oil out. Iraq has been forced to order a production halt at one of its key fields due to the shortage. The United Arab Emirates, Kuwait and Qatar are all boosting supply.

Meanwhile, Iraq is seeking a higher OPEC production quota to recoup oil sales lost during the war, even raising the prospect that it could consider leaving the group. The country’s oil ministry later said an exit hasn’t been proposed, and consideration of a move isn’t the government’s official position.

Chin , Longley and Kubzansky write for Bloomberg.