Oil Prices Slide After US‑Iran Deal
On Thursday, oil markets retreated sharply following the signing of a memorandum of understanding between the United States and Iran that calls for a permanent end to hostilities and the unblocking of the Strait of Hormuz. At 09:43 ET (13:43 GMT), Brent crude futures fell 2.7% to $77.38 per barrel, while U.S. West Texas Intermediate (WTI) dropped 3.7% to $74.00 per barrel, each touching their lowest levels since early March. The decline came after a 1% rise in the prior session when President Donald Trump suggested the agreement was not yet final and warned that military action could resume.
The memorandum, signed by President Donald Trump and Iran’s President Masoud Pezeshkian, ends the three‑month‑old war and seeks to reopen the Strait of Hormuz, a vital chokepoint that transports roughly 20% of global oil. The closure of the strait had previously lifted oil prices above pre‑war levels, stoking inflation concerns.
Analysts at ING noted that, despite the price dip, crude may stay elevated because the resumption of flows through the strait could be gradual and a geopolitical risk premium may persist. They added that Iran expects a swift lifting of U.S. sanctions, which would support a return of Iranian exports, but the speed of normalization depends on operational, logistical and sanction‑related adjustments.
The International Energy Agency (IEA) warned that global oil markets could swing into a substantial surplus once Middle‑Eastern production fully recovers. The IEA forecasts supply growth of 8 million barrels per day (bpd) in 2026‑27, far outpacing demand growth of 2 million bpd, and projects a surplus of about 5 million bpd by 2027.
Oil prices have now declined in five of the last six sessions, amounting to an almost 11% drop for the week. Markets also digested the Federal Reserve’s decision on Wednesday to leave policy rates unchanged while signaling a possible rate hike later in the year, a move that could weigh on broader economic activity and oil demand.
This article was contributed by Ayushman Ojha.