Hedge fund positioning in crude oil turned increasingly bearish in the run-up to diplomatic progress between the US and Iran, with investors building short exposure ahead of signs of easing geopolitical tension that later helped pressure energy markets lower, according to a report by Bloomberg.

Market participants had been positioning for downside risk in oil prices amid expectations that negotiations between Washington and Tehran could reduce supply disruption fears linked to the Strait of Hormuz, a key global shipping chokepoint for crude flows.

The shift in positioning preceded reports of an interim understanding between the two sides, which contributed to a sharp pullback in Brent crude prices and reinforced a broader decline in energy benchmarks over recent weeks.

Oil markets had already been under pressure from rising expectations of improving supply stability and easing inflationary pressures, with Brent down significantly over the past month as geopolitical risk premiums unwound.

The bearish hedge fund stance reflects a broader recalibration across commodity markets, where investors have been reassessing risk exposure amid shifting macroeconomic signals and evolving geopolitical conditions.