Oil prices experienced a sharp decline after the announcement of a peace deal between the US and Iran. Following the news of the reopening of the Strait of Hormuz, prices immediately dropped during early Asian trading hours. President Donald Trump’s statement declaring the resumption of oil flow contributed to this drop.
Brent crude, the global oil benchmark, saw a 3.8% decrease to $84.02 per barrel, while US-traded oil dropped by 4.1% to $81.40. Pakistan confirmed that the formal signing of the agreement is scheduled for Friday in Switzerland.
Although specific details of the deal are pending confirmation by both nations, Iranian state media has outlined a draft 14-point memorandum of understanding. This draft includes the lifting of the US naval blockade and the reopening of the Strait of Hormuz within 30 days under Iranian supervision.
The closure of the strait since the airstrikes by the US and Israel on Iran had disrupted the transport of about 20% of the world’s oil and gas supplies. Trump celebrated the deal on Truth Social, emphasizing its potential to bring peace and security to the region and enable the resumption of oil flow.
In a conversation with the New York Times, Trump affirmed that the agreement ensures the Strait of Hormuz will remain toll-free permanently. Despite the rising petrol prices since February, reaching an average of 158.52p a liter in May, investment bank JP Morgan predicts that global oil prices may linger in the “low $100s” for a significant part of this year, even with the strait reopening.
It is anticipated that the normalization of oil supplies in the region will take time to materialize.
