Oil sinks to pre-war levels, but Iran's Navy just issued a warning

Oil prices fell back to levels last seen before the Iran war on Thursday, as traders bet that the worst of the Strait of Hormuz disruption may finally be easing.

Brent crude slipped below $73 a barrel, while US West Texas Intermediate traded around $69.

Both benchmarks hit their lowest levels since February 27, the day before the US-Israel conflict with Iran began.

The immediate reason is simple. Tankers are moving again, but the complication is just as important.

Iran’s Revolutionary Guards Navy is warning ships that safe passage depends on using routes designated by Tehran.

The tanker backlog finally breaks

The clearest good news for crude traders is that barrels once trapped inside the Gulf are starting to reach the market.

Kpler data showed that at least 20 tankers carrying about 35 million barrels of oil have exited the Strait of Hormuz since the US-Iran agreement reopened the route.

Most were non-Iranian vessels that had been stuck for more than three months. They are now expected to reach buyers, mostly in Asia, by early August.

Approximately 20 million barrels of crude had exited the strait in the previous 24 hours, according to US Energy Secretary Chris Wright.

Wright struck an optimistic tone, saying at the Reuters Global Energy Forum that “we have normal flows today.”

He also said the US would work to keep oil moving even if the initial deal with Iran failed.

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Wall Street bets on de-escalation

Citi has made de-escalation its base case, with Brent seen moving toward the $60 to $65 a barrel range over the next six to 12 months.

The bank has argued that any summer rally should fade, meaning investors should sell into strength rather than chase a rebound.

That is a clear shift from the panic pricing seen during the worst phase of the war.

Tamas Varga, an analyst at PVM Oil Associates, told Al Jazeera that Brent’s sharp fall was “a discernible vote of confidence” that the worst supply disruption fears were now behind the market.

But this is not blind optimism. Vandana Hari, founder of Vanda Insights, told Al Jazeera that crude’s slide was “entirely sentiment-driven”.

Her point was that traders are already pricing in the best-case version of reopening before the hard work of logistics, route coordination and political follow-through is finished.

Iran’s Navy draws a line in the water

The warning from Iran’s Revolutionary Guards Navy is the fine print in the relief rally.

Tasnim News Agency reported that the IRGC Navy said safe passage through the Strait of Hormuz is possible only through maritime routes officially declared by Iran.

The statement also warned that vessel traffic outside those corridors would be considered dangerous and prohibited, and that ships failing to follow instructions could be “dealt with”.

That is not the same as closing the Strait. But it is a reminder that Tehran still wants a role in deciding how the world’s most important oil chokepoint is managed.