After weeks of stalled diplomacy in the Persian Gulf, a tentative agreement between Iran and Oman has set the stage for a meeting of Gulf Cooperation Council (GCC) foreign ministers on Monday, sparking a 2.9% drop in Brent crude to $104.52 a barrel.
What happened?
The GCC, which includes Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman, will gather to discuss a proposed shipping scheme that would allow limited traffic through the Strait of Hormuz. The plan, still under negotiation, aims to ease the choke point that has been effectively closed to Iranian oil exports by a U.S. naval blockade, while Iranian drone and missile attacks have kept other exporters below pre-war levels.
"For Iran and Oman it is about getting the GCC on board to try and use that to get the U.S. to lift its blockade on Iranian ports," a source told the Financial Times.
Why does it matter?
The Hormuz strait handles roughly a fifth of global oil supplies, so any change in its accessibility directly influences world markets. The price fall reflects investor optimism that a temporary traffic arrangement could restore some flow, even as the United States continues to restrict Iranian shipments. At the same time, the United States has been facilitating non-Iranian oil to bypass the strait, keeping regional exports at about two-thirds of pre-conflict levels and weakening Tehran's leverage.
Saudi Arabia, the region's largest oil exporter, has been forced to rely on the Bab al-Mandab Strait and its East-West Pipeline to move crude to the Red Sea after Hormuz closures. Recent Houthi attacks on the pipeline and Saudi tankers have further strained its export routes, prompting Crown Prince Mohammed bin Salman to seek U.S. strikes against the Houthis, a request that was declined.
What happens next?
The upcoming GCC meeting will test whether member states can endorse a temporary Hormuz arrangement without appearing to recognise Iranian control. Any agreement is expected to be limited in duration, with the GCC keen to ensure that ships can move in both directions while preserving the status quo of the U.S. blockade.
Meanwhile, Pakistan, a defence ally of Saudi Arabia that also depends on Hormuz-transiting oil, is keeping a low profile. Its army chief has called for diplomatic de-escalation, and a Pakistani official told Reuters that the country does not want to jeopardise relations with Iran.
"Pakistan is trying to keep a low profile in the Saudi-Houthi conflict because Pakistan's own stakes are high," a Pakistani government official told Reuters.
As the GCC ministers convene, market watchers will monitor whether the talks produce a concrete framework for limited traffic, which could stabilise oil prices and reshape the strategic calculus for both Tehran and Washington.