JUST IN: Oil Prices Fall After US-Iran Peace Agreement Announced
Oil prices declined on Sunday after United States President Donald Trump announced that Washington and Tehran had reached a peace agreement, raising expectations of an end to disruptions that have affected global crude supply.
Brent crude dropped 5.9 per cent to about $84 per barrel, while US crude fell 4.8 per cent to around $81 per barrel. If prices close at those levels, crude oil would record its lowest settlement since March 4, shortly after the conflict began.
Oil had already shown signs of easing before the latest development. On Friday, prices settled below $90 per barrel for the first time since the opening week of the war as investors anticipated progress toward an agreement. However, crude remains significantly above the levels recorded before the United States and Israel launched military strikes on Iran in late February.
Although financial markets have reacted positively to signs of peace, analysts say several challenges remain before oil supplies can return to normal. The Strait of Hormuz must be cleared of mines, shipping activities need to resume without restrictions, production facilities across the Middle East have to restart operations, emergency oil reserves require replenishment, and damaged energy infrastructure must be repaired.
Industry experts also expect oil prices to remain relatively high despite the recent decline. While prices may continue to ease in the short term, analysts believe stronger demand and efforts to rebuild emergency reserves could push them higher again.
Trump announced on social media on Sunday that a deal with Iran “is now complete.” Iranian officials also confirmed that a memorandum of agreement had been finalised with the United States and is expected to be formally signed in Switzerland on Friday.
Both Trump and Iran’s deputy foreign minister for legal and international affairs indicated that the naval blockade on Iranian ports would be lifted. Trump further stated that efforts would be made to remove mines from the Strait of Hormuz, one of the world’s most important oil transit routes.
The US president also said he had authorised “the toll free opening of the Strait of Hormuz.” According to a member of Iran’s parliament, vessels have recently paid an average of about $2 million to pass through the waterway.
Despite the announcement, analysts caution that restoring normal trade flows will not happen immediately. Many oil wells across the Middle East were shut down during the conflict and may require weeks to return to production. Experts also warn that some facilities may struggle to achieve their pre-war output levels.
Energy analysts opined that prolonged disruptions could trigger another sharp increase in prices, particularly if emergency reserves continue to shrink.
“I’m very concerned we could see oil prices skyrocket later this summer with crude oil prices heading well into the mid- to high-$100 range, and gasoline pump prices heading back to all-time highs around $5 a gallon,” he said.
Market observers also remain cautious about the reopening of the Strait of Hormuz, noting that confidence will only return once vessels are able to move through the route consistently and safely.
“it’s great if it happens but I’ll believe it when I see actual ships making the free and unhindered passage through the strait,” said Joe McMonigle, president of think tank Global Center for Energy Analysis and who lives in Saudi Arabia.
Meanwhile, the average price of gasoline in the United States stood at $4.07 per gallon on Sunday, according to AAA. Although fuel prices have fallen for three consecutive weeks, they remain about 36.6 per cent higher than levels recorded before the conflict started.
Investor sentiment also improved following news of the agreement. Dow futures rose 0.6 per cent, while futures linked to the S&P 500 and Nasdaq each gained more than 0.7 per cent.
(CNN)
