Brent crude futures fell sharply in early European trading, shedding more than 2% as reports emerged of tangible progress in diplomatic talks between the United States and Iran in Switzerland.
The price action reflects a rapid unwinding of the supply-risk premium that had built into energy markets following Tehran’s earlier threats to close the Strait of Hormuz.
The market’s reaction underscores how heavily traders have been pricing in the risk of a physical disruption to one of the world’s most critical energy chokepoints.
Just hours earlier, Handelsavisen reported that the US and Iran had established a direct communications line to secure passage through the strait, a development that signaled a de-escalation from the brink of conflict.
The current reports of substantive progress in Swiss negotiations appear to have reinforced that signal, convincing investors that a full-scale blockade is unlikely to materialize.
This shift in sentiment comes after a period of intense volatility driven by geopolitical uncertainty.