Oil Slips Below $100 on Hormuz Hopes as Merz Defies Election Rout

• Brent crude extends four-day decline to $99 on reported Middle East diplomacy
• German chancellor stands firm on overhaul; Beijing urges trade peace with Europe

Brent crude tumbled below the $100-a-barrel threshold on Tuesday as reports of diplomatic engagement around the Strait of Hormuz eased geopolitical supply premiums, while German Chancellor Friedrich Merz reiterated his resolve to push through an economic overhaul despite an election drubbing.

Market sentiment was underpinned by an active run of bilateral trade diplomacy across Europe, Asia, and North America, helping regional equities post modest advances even as Tokyo trading remained shuttered for a holiday.

Energy Retreat

Brent crude fell 2.5% to trade at $99 a barrel, extending a retreat that has wiped out 8% over the past four sessions. The selling gathered pace following media reports pointing to potential diplomatic breakthroughs over maritime security in the Strait of Hormuz, a critical chokepoint for roughly a fifth of the world’s petroleum consumption.

The decline offers welcome breathing room for global central banks monitoring transport-fuel inflation, which has strained logistics corridors and corporate margins in recent weeks.

Trade Diplomacy

International trade ties saw fresh momentum as governments sought to de-risk key supply lines and avert retaliatory tariffs:

• China-EU Relations: Chinese Foreign Minister Wang Yi stated that China and the European Union are strategic partners rather than systemic rivals, arguing both economic blocs must work actively to avoid an escalating trade conflict.
• US-China Summit: The remarks coincided with preparatory discussions between American and Chinese officials addressing trade practices, artificial intelligence governance, and cross-border capital flows ahead of an upcoming bilateral meeting between Donald Trump and Xi Jinping.
• Bilateral Accords: The EU completed negotiations on a trade pact with the Philippines, while officials from India and Canada signaled they are nearing the finish line on a long-sought bilateral deal.

Merz Holds the Line

In Germany, Chancellor Merz confronted the fallout of severe regional electoral setbacks, rejecting calls to alter course or step aside. Merz reiterated that he will remain in the chancellery to steer his administration’s planned structural reforms through parliament, despite surging support for populist parties that has weakened the center-right’s political grip in key regional assemblies.

Market Wrap

Global markets reflected cautious risk appetite alongside the retreat in raw-material prices:

• Equities: The Stoxx Europe 600 advanced 0.5%, supported by industrial and consumer shares. Mainland Chinese benchmarks traded largely flat. US equity index futures signaled a modestly firmer open.
• Volume: Regional liquidity was subdued across Asian trading hours with Japanese financial markets closed for extended holidays.