Scott Bessent, the U.S. Deputy Treasury Secretary for International Affairs, said oil prices could fall quickly once an agreement reopens the Strait of Hormuz [1].
This potential shift in energy pricing is critical because the Strait of Hormuz is a primary artery for global oil shipments. A successful deal to reopen the waterway would alleviate current market tightness by increasing the available supply of crude oil to international markets [1].
Speaking to reporters on May 24, Bessent said the stability of the energy market is linked to diplomatic resolutions involving the U.S. and Iran [1]. He said the current pricing environment is heavily influenced by the restricted flow of oil through the region.
"Once we have an agreement between the US and Iran to open the Strait of Hormuz, I think the oil market is going to be very well supplied on the other side," Bessent said [1].
Bessent said the broader conflict in the region has kept prices elevated. He said oil prices will be much lower after the war [2].
While Bessent's comments focus on the impact of a diplomatic agreement, other reports have attributed similar predictions regarding falling oil prices to Senator Marco Rubio and former President Donald Trump [3]. However, the Treasury official said the price drop is tied to the logistical reopening of the shipping lane [1].
The Strait of Hormuz remains one of the most volatile chokepoints in the global economy. Any agreement to secure the passage of tankers would likely trigger a rapid reaction in futures markets as the risk premium associated with the conflict diminishes [1].
“"Oil prices will be much lower after the war."”
The comments from a high-ranking Treasury official suggest that the U.S. administration views the reopening of the Strait of Hormuz as the primary lever for lowering global energy costs. By tying price stability to a deal with Iran, the U.S. signals that diplomatic resolution of the regional conflict is a prerequisite for easing the economic pressure of high oil prices on the global economy.
