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China is engaging in direct diplomatic talks with Iran to secure safe passage for crude oil and Qatari liquefied natural gas (LNG) through the Strait of Hormuz, which has been effectively closed for six days due to the US-Israeli-Iran conflict. The closure has disrupted about 20% of global oil and LNG supply, with crude tanker transits plummeting from 24 per day to just four. Over 300 tankers are currently stranded in the strait, and only Chinese or Iranian-owned vessels are reportedly being allowed to pass. Crude oil prices have surged 15% since the conflict began, with WTI crude recently dropping to $79.40 after a US Treasury waiver allowed Indian refiners to purchase stranded Russian oil. The US Treasury's temporary measure aims to alleviate pressure from Iran's energy blockade while expecting India to increase US oil purchases. The situation has significant implications for global energy markets, with Brent crude likely to remain volatile depending on whether China's efforts lead to a broader reopening of the strait or merely a preferential channel for Beijing. Traders are closely monitoring geopolitical developments and potential price reactions, as sustained high oil prices could strain economies and influence central bank policies. The US's temporary waiver for Indian refiners also highlights the complex interplay of sanctions, energy security, and diplomatic leverage in the region. For MENA investors, the strait's status remains a critical risk factor for Gulf energy exports. Saudi Arabia and other OPEC+ members may adjust production strategies if the bottleneck persists. Traders should watch for further diplomatic signals between China, Iran, and the US, as well as technical levels for WTI and Brent. The $80 WTI threshold is a key psychological level to monitor, with potential spillover effects into equity and currency markets.
