Hormuz Deal Talk Crashes Oil 7%, but Aramco Says 2.6 Billion Barrels Are Already Gone

On Monday, August 3, US equities roared to the edge of their all-time highs. The Dow Jones Industrial Average closed at a record 53,178.41, up 1.3%. The S&P 500 climbed 1.5% to sit just 0.1% below its June 2 peak of 7,620.90. The Nasdaq Composite surged 2.1%, led by a broad Magnificent Seven rally in which Meta rose 6%, Microsoft, Amazon, and Alphabet gained between 4.4% and 4.9%, and Nvidia added 2.9%.^[1]

The catalyst was not earnings, not the Fed, not AI. It was oil — or rather, the prospect that oil might stop being a problem.

Brent crude, the primary international benchmark, fell roughly 5% on Monday before extending losses to a 7% intraday decline — the largest single-day drop in weeks — after President Donald Trump announced he had called off what he described as “the biggest attack since World War II” against Iran and said talks to reopen the Strait of Hormuz were underway.^[1][2]

By Tuesday morning, Treasury Secretary Scott Bessent went further, telling CNBC that a deal to reopen the strait could arrive “today or tomorrow.” “We may have Iran deal tomorrow to open Hormuz,” Bessent said, adding that he was already seeing “quite a few ships coming out of Hormuz.”^[3]

The market response was immediate. Dow futures surged more than 640 points on Bessent’s remarks, and crude oil fell nearly 4% in intraday trading on Tuesday before paring losses.^[4]

But here is the part the futures market is not fully pricing: the physical market is a different world.

The Disconnect Between Futures and Physical

Saudi Aramco CEO Amin Nasser, speaking on Tuesday as the company reported a 42% jump in second-quarter net profit, delivered a warning that cut against the grain of the day’s risk-on sentiment. The conflict involving Iran has removed an estimated 2.6 billion barrels of crude from global supplies, Nasser said. Shipping through the Strait of Hormuz is running at roughly one-tenth of pre-conflict levels. The world continues to lose more than 100 million barrels for every week the waterway stays disrupted.^[5]

“If the strait were open today, it would take up to 18 months at an average rate of 2.1 million barrels a day to replenish depleted inventories,” Nasser said.^[5]

He described the disruption as “the biggest supply shock in history,” noting that the crisis has removed an average of 11 million barrels per day of liquids supply from global markets, while Asia’s crude imports fell by around 6 million barrels per day at the peak of the disruption.^[5]

There is a disconnect between what futures prices are saying and what the physical market is showing. Nasser pointed to strong refining margins as evidence of tight refined fuel supplies and warned that the global refining system was under significant strain. Any major unplanned or prolonged refinery shutdown could compound the pressure.^[5]

Even if a diplomatic deal materializes, the physical mechanics of reopening Hormuz are not instantaneous. Mine clearance operations would need to make the waterway safe for transit, and a backlog of vessels that have been waiting — or rerouting — would take time to clear. Analysts note that more than 80% of the energy moving through Hormuz is destined for Asian markets, meaning the shipping disruption has hit India, China, Bangladesh, and Pakistan hardest.^[2]

Aramco’s Bypass: The East-West Pipeline

Saudi Aramco has been routing crude exports through its East-West pipeline, which transports oil from the kingdom’s eastern producing fields to the Red Sea port of Yanbu, providing a bypass around the Strait of Hormuz. Nasser said the company is “actively increasing optionality” and exploring ways to expand pipeline capacity, including potentially increasing the pipeline’s throughput.^[6]

The East-West pipeline, together with existing global inventories, has helped reduce the net supply loss to around 1.8 billion barrels despite the continuing disruption, Nasser said. Aramco will continue to use all available export corridors, including the Strait of Hormuz, the Bab el-Mandeb Strait, the Suez Canal, and Egypt’s SUMED pipeline.^[5]

Aramco also said it is looking at options to expand its oil export capacity as Houthi rebels threaten shipments in the Red Sea, adding a second layer of maritime risk to the first.^[6]

Iran Denies What Washington Claims

The diplomatic picture is murkier than the market rally implies. Iran’s Ministry of Foreign Affairs spokesman, Esmaeil Baghaei, told a news conference on Monday that Tehran was not engaged in talks with Washington and had no meetings with US officials planned. He said Iranian officials were negotiating with Oman on allowing ships to transit the Strait of Hormuz, and that issues between the US and Iran would need to be addressed in “next stages.”^[1]

On Tuesday, Iran’s state media denied any agreement to reopen the strait, calling published reports of a deal false.^[3]

Qatar, acting as a mediator, said progress was being made and that a draft agreement had been circulated, driving oil prices lower in afternoon trading. But the gap between Qatar’s optimism and Iran’s denial is exactly the kind of signal that should give traders pause: one side is describing an imminent deal; the other says there is no deal at all.^[3]

Oil Stocks Lag the Equity Rally

While tech stocks surged on the de-escalation narrative, oil and energy names moved in the opposite direction — a tell that not all market participants are buying the peace story. As of 12:37 ET on Tuesday, Chevron (CVX) was down 1.3% to $190.67, ExxonMobil (XOM) fell 0.8% to $153.82, and ConocoPhillips (COP) dropped 1.1% to $117.85. The United States Oil Fund (USO) was down 4.7% to $116.39, extending Monday’s sharp losses.^[7]

Brent crude, which fell about 5% on Monday, rebounded modestly on Tuesday to trade around $84–$86 per barrel as doubts over the talks resurfaced and fresh maritime security incidents were reported.^[4] The bounce — oil’s biggest one-day decline followed by an immediate recovery — is the physical market’s way of saying it is not yet convinced.

The Tariff Layer

Compounding the geopolitical risk picture, a coalition of 25 Democratic-led states sued the Trump administration on Monday over its latest round of tariffs — 10% to 12.5% levies on goods from 60 trading partners. The states argue the administration used Section 301 of the Trade Act to replace sweeping tariffs already rejected by the Supreme Court and the US Court of International Trade. The lawsuit asks the court to block and overturn the tariffs and refund duties already paid.^[8]

For import-sensitive sectors — retail, manufacturing, consumer goods — the lawsuit introduces a second axis of policy uncertainty on top of the Middle East energy shock. If the courts block the tariffs, it would be a tailwind for importers and consumers; if the administration prevails, the cost structure stays elevated. Either way, the legal timeline will stretch well beyond the current quarter.

What to Watch Next

• Bessent’s 48-hour window. The Treasury Secretary put a clock on the Hormuz deal. If Wednesday passes without an agreement — or with Iran reiterating its denial — the oil selloff reverses and the equity rally’s foundation weakens. Watch Brent’s response to the deadline.
• Hormuz transit data. S&P Global reports that shipping traffic through the strait remains subdued despite the diplomatic push, with security incidents persisting.^[2] A restoration of normal tanker traffic — not just a headline about a deal — is the metric that would validate the risk-on move.
• Aramco’s physical-market signals. Refining margins, inventory draws, and any disruption to the East-West pipeline or Yanbu port operations would directly contradict the futures-market optimism. Nasser’s 18-month replenishment timeline means even a clean reopening leaves a structural supply deficit.
• The tariff lawsuit’s procedural timeline. The Court of International Trade previously ruled against the administration’s earlier tariff regime. A preliminary injunction in this new case would shift the trade-policy outlook for import-sensitive equities.
• Iran’s posture versus Qatar’s mediation. The gap between Qatar saying a draft agreement has been circulated and Iran calling the reports false is the single most important divergence to monitor. If that gap closes toward confirmation, oil heads lower. If it widens, yesterday’s rally unwinds.

FN2 Research provides financial research and education, not personalized investment advice.