As of today's afternoon close on the Shanghai International Energy Exchange, the main crude oil futures contract rose 2.13% to 576.5 yuan per barrel, recouping some of yesterday's losses.

Following the release of detailed US sanctions against Iran yesterday, market rumors emerged that Washington had proposed lifting the blockade and sanctions in exchange for reopening the Strait of Hormuz. Iran also stated that it had reached an agreement with Oman on revenue distribution for the Strait of Hormuz sea area. These developments suggest that active hostilities between the two sides have ceased, with easing expectations gaining ground, keeping crude prices in a broadly weak yet wide-range oscillating pattern.

Driver One: Rising geopolitical de-escalation expectations erode the risk premium in oil prices

With the US detailing its sanctions against Iran and reports surfacing of a proposed US initiative to lift the blockade and sanctions in exchange for reopening the Strait of Hormuz, expectations of geopolitical easing have rapidly intensified. Iran, meanwhile, confirmed that it and Oman had reached consensus on revenue distribution for the Hormuz waters. Although fundamental disagreements between Washington and Tehran remain difficult to reconcile, active combat confrontation has effectively paused as time progresses, with the frequency of exchanges dropping markedly over the past week or two. The US has shifted focus toward economic warfare tools such as intensified sanctions, while Iran faces severe socioeconomic strain from restricted exports. Combined with sustained mediation efforts by third-party nations, short-term de-escalation expectations continue to build, and medium-term expectations for a strait reopening are gradually strengthening. With the conflict unable to expand further and easing expectations on the rise, oil prices have been gradually retreating from elevated levels in a choppy manner.

Driver Two: Domestic-international price spreads converge notably, SC crude's discount-repair rally nears its end

Looking at the price spread between domestic and international benchmarks, a clear pattern of "strong domestic, weak international" had prevailed earlier, with SC crude outperforming both Brent and WTI significantly. The earlier weakness in SC crude relative to the external benchmarks stemmed from ample domestic strategic reserves and a sharp decline in refined product demand amid rising new energy vehicle penetration. These two factors together effectively cushioned the supply-side pressure, allowing SC prices to trade at a discount to international benchmarks given the relatively balanced domestic supply-demand situation. From a medium-to-long-term perspective, however, such an unconventional price spread structure was bound to correct. Against a backdrop of recurring geopolitical tensions and Middle East supply disruptions persisting for over half a year, SC crude strengthened steadily and progressively narrowed its discount to the external benchmarks. That discount has now largely been repaired and returned to normal ranges. Furthermore, reports indicate that actual crude export volumes via transshipment through the strait have recovered to more than half of pre-conflict levels, reinforcing expectations of returning supply. As such, this round of discount-repair momentum is likely nearing its conclusion.

Outlook: Short-term weakness likely to persist, with strait navigation status as the key variable

In the near term, the geopolitical premium remains relatively elevated, leaving room for further downward adjustment should tensions confirm a genuine de-escalation. Crude prices are likely to maintain a weak oscillating trend in the short term. Close attention should be paid to whether navigation through the Strait of Hormuz resumes. Against a backdrop of sluggish demand recovery, weak shipping conditions could exert further downward pressure on prices, while the opposite scenario would see the geopolitical premium rebuilt. Global commercial crude inventories currently remain at relatively low levels for this time of year in recent years, and OPEC+ retains the flexibility to adjust production cuts as a supporting mechanism. At the same time, the ongoing evolution of geopolitical developments warrants close monitoring — a short-term resumption of navigation does not necessarily imply a fundamental resolution of the complex contradictions. The potential for renewed volatility between the US and Iran remains, which could still trigger episodic upward spikes in oil prices.

Risk warnings: A resurgence or escalation of US-Iran conflict, or a significant easing of geopolitical tensions.