Summary
- Global oil prices dropped by more than $2 per barrel on Thursday after the United States and Iran signed an interim agreement aimed at ending recent hostilities, reopening the Strait of Hormuz, and easing US sanctions on Iranian oil exports.
- The agreement raised expectations of increased crude supplies in global markets and triggered a sharp sell-off in oil futures.
- The 14-point agreement initiates a 60-day negotiation period during which Iran will ensure toll-free passage through the Strait of Hormuz, one of the world’s most important oil and gas shipping routes.
Global oil prices dropped by more than $2 per barrel on Thursday after the United States and Iran signed an interim agreement aimed at ending recent hostilities, reopening the Strait of Hormuz, and easing US sanctions on Iranian oil exports. The agreement raised expectations of increased crude supplies in global markets and triggered a sharp sell-off in oil futures.
By 0616 GMT, Brent crude futures had fallen by $2.14, or 2.69%, to $77.41 per barrel, while US West Texas Intermediate (WTI) crude dropped $2.36, or 3.07%, to $74.43 per barrel.
The declines pushed Brent to its lowest level since early March, while WTI also touched its weakest point in more than five months. The benchmarks extended their losses after briefly recovering on Wednesday following comments from US President Donald Trump, who warned that Washington could resume military action if Iran’s leaders failed to comply with the agreement.
Analysts said traders reacted positively to the prospect of additional Iranian crude entering global markets. According to Tony Sycamore, a market analyst at IG, energy markets have aggressively priced in a faster-than-expected return of Iranian oil supplies following the signing of the US-Iran memorandum of understanding.
The 14-point agreement initiates a 60-day negotiation period during which Iran will ensure toll-free passage through the Strait of Hormuz, one of the world’s most important oil and gas shipping routes. The accord also aims to restore shipping traffic through the strait to full capacity within 30 days.
While the agreement marks a significant diplomatic breakthrough, it leaves several complex issues unresolved, including Iran’s nuclear programme. The deal also calls on the United States and its partners to prepare a $300 billion plan to support Iran’s economic recovery and reconstruction.
Despite the sharp decline in prices, some analysts believe further losses may be limited. They point out that supply conditions could remain relatively tight in the short term, as some oil cargoes have already been redirected through alternative routes. In addition, shipping companies may remain cautious about returning to the region until they are confident that the agreement will hold and regional tensions will not flare up again.
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