Reports of progress toward a US-Iran agreement to end hostilities and reopen the Strait of Hormuz sent oil prices plunging on Wednesday, May 6, dragging Hong Kong-listed energy stocks sharply lower on Thursday as markets digested the prospect of eased supply disruptions.
Oil Prices Breach $100 as Diplomacy Advances
Brent crude futures fell approximately 9.5% on May 6, dropping to $99.60 a barrel — their lowest level in nearly two weeks — after reports emerged that Washington and Tehran were nearing consensus on a memorandum of understanding to end the conflict. West Texas Intermediate crude fell nearly 7% to around $95.
The selloff was driven by signals from the Trump administration that the offensive phase of Operation Epic Fury had concluded and that a framework deal was within reach. President Trump, posting on Truth Social, indicated that if Iran complied with the terms, the US naval blockade of Iranian ports in the Gulf of Oman would end and the Strait of Hormuz would be reopened “to all, including Iran”.
PetroChina Leads Hong Kong Energy Rout
On Thursday, May 7, Hong Kong’s energy sector bore the brunt of the oil price collapse. PetroChina (00857.HK) opened 3.5% lower and extended losses through the session, falling 8.48% to close at HKD 10.69. CNOOC (00883.HK) dropped 5.78% to HKD 26.42, while China Petroleum & Chemical (Sinopec) also declined.
The losses came after a period of strong gains for Chinese oil producers, who had benefited from elevated crude prices since Iran effectively closed the Strait of Hormuz in late February. Brent crude surged 41% in March alone as the blockade tightened global supply.
Broader Market Rallies on Easing Tensions
Even as oil stocks tumbled, the broader Hong Kong market advanced. The Hang Seng Index rose 1.22% on May 6 and continued climbing on May 7, with the Hang Seng Tech Index surging more than 3% past the 5,100-point level. Technology shares including Alibaba and Baidu led gains as lower oil prices eased inflation concerns.
The diplomatic framework, mediated by Pakistan, would see Iran agree to a phased reopening of the strait in exchange for a relaxation of the US maritime blockade, with nuclear discussions deferred to a later stage. Approximately 23,000 sailors from 87 countries remain stranded in the Persian Gulf due to the crisis, and a resolution would mark the end of the most severe disruption to global energy supplies in decades.
