Oil prices dropped sharply on Wednesday, with Brent crude falling to $73.98 a barrel and US West Texas Intermediate (WTI) slipping below $70 to $73.95, as more stranded tankers cleared the Strait of Hormuz and the US eased sanctions on Iranian oil sales. Both benchmarks hit their lowest levels since before US-Israeli strikes on Iran began on February 28, 2026.

The immediate trigger was a surge in tanker traffic through the strait. Around 20 million barrels of crude exited the waterway in just 24 hours, according to US Energy Secretary Chris Wright, speaking at the Reuters Global Energy Forum in New York. Three tankers carrying 5 million barrels were actively exiting on Wednesday, with two bound for Asia. That volume, while still below pre-war levels, was enough to shift market sentiment decisively.

The supply unlock is linked to a temporary US-Iran deal. The US Department of Energy confirmed that Washington has authorised Iranian oil sales this week, easing decades-old sanctions as part of a push toward a broader peace agreement. The terms reportedly include Iranian commitments on nuclear inspections and guaranteeing free transit through the Strait of Hormuz. Energy Secretary Wright stated directly that the US will ensure oil flows through the strait even without a final deal with Tehran.

How markets are reading the shift

The price structure in oil futures has also flipped in a significant way. Brent crude for second-month delivery is now trading above prompt delivery prices for the first time since the war started. In commodity markets, this condition, called contango, signals that traders expect near-term supply to be plentiful. It is a meaningful technical shift away from the tight-supply premium that had prevailed throughout the conflict period.

Physical crude cargoes are selling at discounts globally as Middle Eastern supply rises quickly. Iran is positioned to ramp up both production and exports, and analysts say the timeline could be short. Tim Waterer, chief market analyst at KCM Trade, said that given the volume of oil stored on tankers, a supply increase is more likely a matter of weeks than months.

ING analysts noted that vessel crossings through the Strait of Hormuz have increased in recent days, though they remain well below pre-war levels. Iranian mines in the strait are still causing delays, Wright acknowledged, which means a full return to normal flows has not happened yet.

Oman has added logistical support, designating two temporary shipping routes, one north and one south of the existing lane, to help vessels exit the region safely. Oman also confirmed it will not impose tolls on vessels using the strait, removing a potential cost friction that had been flagged as a risk.

What could still go wrong

The durability of the US-Iran arrangement is genuinely uncertain. President Donald Trump said on Tuesday that Iran had agreed to nuclear inspections into what he called "infinity." Tehran denied making any such concession. That gap between the two sides' public accounts of the same deal is a clear warning signal for markets pricing in a durable resolution.

If the interim arrangement breaks down or Iran restricts traffic again, prices could reverse quickly. The current $73-74 level already reflects a significant optimism premium unwinding, down more than $3 in a single session. Any sign that the nuclear inspection terms remain unresolved could put a floor under prices faster than the current momentum suggests.

For India, which is a major buyer of both Iranian and Middle Eastern crude, cheaper oil and eased sanctions matter on two levels. Lower import prices reduce the fuel subsidy burden and support the rupee by narrowing the current account deficit. A durable reopening of Iranian supply could give Indian refiners more flexibility on sourcing and pricing over the coming months.