News that the United States and Iran are considering a phased reopening of the Strait of Hormuz quickly jolted the oil market: international crude oil futures, which had earlier risen about 5% during the session, rapidly gave back most of their gains.

The market's expectation of a diplomatic breakthrough between Washington and Tehran swiftly compressed the geopolitical risk premium that had built up in oil prices.

In the early afternoon of US stock trading on Thursday, the 24th, Reuters cited Iranian sources, two regional officials and two Western diplomatic sources as saying that US and Iranian negotiators are exploring in New York a path to ending the war in phases, including Iran reopening the Strait of Hormuz and the United States lifting its economic blockade on Iran, with Iran potentially also receiving some of its frozen assets.

After the news emerged, US WTI crude briefly fell back below $93.30, with its intraday gain narrowing to about 1%; Brent crude briefly dropped below $99 to below $98.70, with its intraday gain at less than 0.6%. However, the pullback did not last, and afterward the intraday gains of both WTI and Brent widened to more than 1.5% and 2%, respectively.

Before this news emerged, international crude oil futures had accelerated upward after rebounding on Wednesday. When they hit session highs during early US trading on Thursday, WTI rose to $96.78 and Brent to $108.23, both up about 5% for the day. Media outlets believed that one major driver of oil's accelerated rebound on Thursday, following Wednesday, was missile launches by Yemen's Houthi rebels toward Saudi Arabia, and another main reason was the market's view that US-Iran diplomatic talks had made limited progress.

US and Iran's "Strait for Unblocking" Proposal Exposed

Reuters reported that a senior Iranian official said the most viable way to break the negotiating deadlock is to reach a phased arrangement: Iran allows ships to pass through the Strait of Hormuz, and in exchange, the United States lifts its economic blockade on Iran, while Tehran may also receive frozen assets.

This means that the reopening of the Strait of Hormuz could become a key bargaining chip in US-Iran negotiations.

Reuters cited sources as saying that a major obstacle currently facing US-Iran negotiations is that neither side is willing to be the first to give up its leverage. Iran hopes to exchange transit rights through the strait for the lifting of US economic pressure, while the United States wants to ensure that this critical global oil transportation corridor restores stable and free navigation.

Under this phased concept, Iran might first allow ships to gradually resume passage through the Strait of Hormuz, while the United States would correspondingly take measures such as lifting its economic blockade. Iran could also potentially receive frozen assets.

However, Reuters stressed that this is still a proposal under negotiation, that the two sides have not reached an agreement, and that significant differences remain in the talks.

Why Did Oil Prices Surge Earlier?

Before the above Reuters news emerged, international oil prices had already rebounded for a second consecutive trading day on Thursday.

Previously, international crude oil futures had fallen for five consecutive trading days. On Thursday, driven by renewed geopolitical risk, they rose sharply at one point, with both WTI and Brent crude posting intraday gains of about 5%.

One important backdrop was the market's view that US-Iran diplomatic talks had made limited progress, meaning supply risks related to the Strait of Hormuz could persist for longer.

In reporting on oil price movements on Thursday, The Wall Street Journal cited "limited diplomatic progress between the United States and Iran" as one of the important backdrops for the rise in oil prices. Reuters' crude oil market report that day also noted that oil prices had risen by about 4% at one point on Thursday to a one-week high, due to reasons including missile launches by Iran-backed Houthi forces toward Saudi Arabia and no obvious progress in US-Iran diplomatic talks.

In other words, before the latest Reuters news emerged, the core logic of oil market trading was still "lack of diplomatic progress -> continued war and supply risks -> the Strait of Hormuz may remain disrupted -> rising oil risk premium."

With the emergence of news that "the US and Iran are studying a phased reopening of the Strait of Hormuz," that logic quickly changed.

The Strait of Hormuz Becomes a Key Bargaining Chip

The reason the Strait of Hormuz can move oil prices so quickly is that it is one of the world's most important energy transportation corridors.

Against the backdrop of the current US-Iran conflict, the navigation situation in the strait has been a core variable of concern in the international crude oil market. The market had previously continued to trade the supply risks that could be caused by disruption in the strait, and once US-Iran negotiations could push for the strait's reopening, market concerns about supply interruptions could cool noticeably.

Therefore, the sharp fluctuations in oil prices on Thursday were essentially the market rapidly switching between two scenarios:

Previously, it was trading limited progress in US-Iran negotiations and continued risks in the strait; after the Reuters report emerged, the market began trading the possibility of a phased solution between the US and Iran and the potential reopening of the strait.

It is worth noting that the Reuters report did not mean the United States and Iran had reached an agreement. The sources cited in the report also pointed out that major differences remain between the two sides, especially over how to arrange for both sides to release their leverage simultaneously.

Therefore, for the oil market, what truly matters going forward is not the news of the "phased plan" itself, but whether this concept can be further transformed into a concrete agreement and whether the Strait of Hormuz can truly restore stable navigation.

Before that, any new news about progress in US-Iran negotiations, navigation in the strait, and regional attacks could continue to trigger sharp fluctuations in oil prices.