Brent crude briefly fell below $72.48 a barrel Thursday, erasing the entire price spike from the four-month U.S.-Iran war, as vessels crossing the Strait of Hormuz roughly doubled in a single session and U.S. and Iranian negotiators settled into a 60-day window to convert their interim accord into a permanent deal.
The move marks the first time the global benchmark has traded at the level it held on Feb. 27, the day before the United States and Israel launched joint strikes on Iran. Falling crude is feeding into the Federal Reserve's calculation as Chairman Kevin Warsh prepares to receive Thursday's personal consumption expenditures report, the central bank's preferred inflation gauge.
What shifted
Maritime intelligence firm Kpler counted 70 ships transiting the Strait of Hormuz on Wednesday, a 105 percent jump from the prior day, with traffic increasingly hugging a southern route along Oman's coastline rather than the northern passage closer to Iran. Marisks chief executive Dimitris Maniatis estimated about 80 ships have crossed since the first round of U.S.-Iran talks in Switzerland began Monday, and said the U.S. Navy has charted a southern lane judged safe from mines and other obstacles laid during the war. Pre-war traffic exceeded 100 ships a day.
Brent settled down 3.8 percent at $73.87 a barrel Wednesday and was off another 1.3 percent in early Thursday trading at $72.90, according to CBS News. U.S. benchmark crude fell 3.9 percent to $70.34 Wednesday and traded at $69.37 early Thursday. The BBC reported Brent edged back to $72.63 after touching the pre-war mark.
On the Street
The oil rollover collided with a hawkish turn at the Fed. The yield on the 10-year U.S. Treasury note fell nine basis points Wednesday to a level last seen in April, NBC News reported, restoring the customary link between crude prices and borrowing costs after a brief decoupling. Wall Street forecasters still expect the May PCE print due Thursday to show inflation quickening from April, fueled by higher oil prices earlier in the quarter and stronger consumer spending.
Warsh, who took over the Fed this spring, has said the central bank is committed to bringing inflation back to its 2 percent target, a level it has missed for five years. Citigroup analysts wrote in a client note that his decision to stand up task forces to reexamine the Fed's inflation framework could tilt policy dovish. "The market seems to underappreciate the flexibility implicit in appointing task forces to consider the drivers and measurement of inflation," the analysts wrote.
Treasury Secretary Scott Bessent argued the macro picture is already turning. "Now that we are, I believe, on the other side of this conflict, gas prices will come back down, inflation will come back to target," Bessent said Wednesday after an appearance at the Economic Club of New York.
The toll fight
The diplomatic overhang is a brewing fight over who controls the strait. Iran and Oman have said they are creating a joint mechanism to regulate traffic that could carry "costs associated," and Tehran has long signaled it could impose fees on commercial vessels. Secretary of State Marco Rubio rejected the idea at a Gulf Cooperation Council meeting in Bahrain on Thursday.
"International waterways do not belong to any nation state," Rubio said. "If in fact we accepted that you can charge money to use an international waterway because it happens to be near your territorial space, well then this will spread throughout the world like a contagion." Oman's foreign minister, Sayyid Badr bin Hamad Al Busaidi, said after the meeting that "future arrangements concerning the Strait of Hormuz will not involve imposing any transit fees." Iran's Islamic Revolutionary Guard Corps countered Thursday that the only authorized route through the waterway is the one designated by Tehran.
At the pump
The pass-through to American drivers has been slower. The average price of regular gasoline in the United States has dropped to about $3.93 a gallon after touching $4 in April, its highest since 2022, but remains well above pre-war levels, the BBC reported. President Trump on Wednesday ordered an investigation into Shell, ExxonMobil, Chevron and BP, accusing the companies of "gouging" drivers. "Oil prices have come down so much and we are not seeing anything at the pump by comparison the way they should be," Trump told reporters in the Oval Office.
Chevron Chief Financial Officer Eimear Bonner told CNBC's "Squawk Box" Europe on Thursday that relief will lag. "I mean there is a lag between oil prices and reduction in oil prices and when that shows up at the pump," Bonner said. The American Petroleum Institute said fuel prices "don't move in lockstep with crude oil."
The other side
Shipping firms are not yet treating the reopening as permanent. Lloyd's List Editor-in-Chief Richard Mead called the current stretch a "limbo period," with no clarity on what rules will govern Hormuz traffic after the 60-day window closes in August. "We don't know what normal is going to look like yet," Mead said. Thursday's reporting was drawn from center and lean-left outlets; no right-leaning industry commentary on the pricing reset surfaced by press time.
The next test is Thursday's PCE release, which will tell the Fed whether the spring's oil spike has already cycled into core inflation, or whether the rollover in Brent has arrived in time to keep Warsh's task forces in front of the data.