Overview

Oil prices showed mixed movement on Thursday but remained on track for a steep weekly decline after the United States and Iran signed a peace memorandum of understanding (MoU) that will immediately reopen the Strait of Hormuz without any tolls or charges for a 60‑day period. Crude benchmarks have slumped roughly 9 % to 10 % this week, reaching levels not seen since early March and effectively stripping away much of the geopolitical risk premium that has been priced in since the conflict began.

Price Movements

At 14:33 ET (18:33 GMT), Brent crude futures for August ticked up 0.2 % to $79.69 per barrel, while U.S. West Texas Intermediate (WTI) futures slipped 0.2 % to $76.66 per barrel.

Peace Accord Details

President Donald Trump signed the MoU during a dinner at France’s Versailles palace, an event documented by a White House image and a video posted by French President Emmanuel Macron. Iranian President Masoud Pezeshkian shared an image of Iran’s side of the agreement on social media, describing it as a “historical document” born of “national resilience, political rationale, and responsible diplomacy.”

The MoU stipulates:

  • An immediate end to military operations on all fronts, including Lebanon.
  • A 60‑day window for further negotiations toward a final deal.
  • Iran’s commitment not to procure or develop nuclear weapons, with any enriched material to be disposed of through a mutually‑agreed mechanism during the negotiation period.
  • Reopening of the Strait of Hormuz without tolls or charges for the 60‑day period, restoring a vital conduit for roughly one‑fifth of the world’s oil and liquefied natural gas that has been largely shut since the conflict’s onset.

Market Commentary

Adam Turnquist, chief technical strategist at LPL Financial, noted that oil is trading lower following the peace agreement, shifting the narrative to a “show‑me” phase. He highlighted that Brent has fallen nearly 40 % from its April highs and is now testing support at its rising 200‑day moving average, with momentum indicators showing oversold conditions. Turnquist added that a short‑term relief rally would not be surprising given the depth of the pullback.

U.S. Senator JD Vance praised the unblocking of Hormuz in a White House press conference, stating that 12.5 million barrels of oil transited the strait the previous night—a high since the conflict began. He also mentioned that gas prices fell below $4 per gallon for the first time since the war and are expected to keep falling, noting that Iranian vessels did not fire on any ships for the second consecutive night.

Supply‑Demand Outlook

The International Energy Agency (IEA) projected that global oil supply could grow by about 8 million barrels per day (bpd) between 2026 and 2027, far outpacing expected demand growth of roughly 2 million bpd. This imbalance could generate a surplus of more than 5 million bpd by 2027.

Monetary Policy Context

The Federal Reserve, under new chair Kevin Warsh, left interest rates unchanged on Wednesday, as market participants expected, but signaled a potential rate hike later in the year. Elevated borrowing costs could weigh on broader economic activity and potentially dent oil demand.

Contributors

The article was contributed by Ayushman Ojha and Scott Kanowsky.

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