Global oil prices fell sharply on Thursday, hitting their lowest levels since the outbreak of tensions between the United States and Iran, following the announcement of an interim agreement aimed at reducing hostilities and restoring oil flows.
Brent crude futures dropped by $1.53, or 1.9 per cent, to $78.02 per barrel, while U.S. West Texas Intermediate (WTI) crude fell by $2.22, or 2.9 per cent, to $74.57 per barrel, according to Reuters.
The decline saw Brent crude reach its weakest level since the first trading session after the initial US-Israeli strikes on Iran, while WTI slipped to its lowest point since early March.
Market confidence improved after Washington and Tehran signed a 14-point Memorandum of Understanding designed to de-escalate tensions and pave the way for increased Iranian oil exports.
Analysts said traders quickly responded to expectations that additional Iranian crude could soon return to global markets.
“The selloff extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent U.S.-Iran memorandum of understanding,” IG market analyst Tony Sycamore said.
Under the agreement, a 60-day negotiation period has commenced during which Iran will guarantee toll-free passage through the Strait of Hormuz, one of the world’s most strategically important oil and gas shipping routes. The deal also aims to restore traffic through the waterway to full capacity within 30 days.
Industry experts expect a gradual increase in oil shipments through the Strait, although they caution that prices are unlikely to collapse significantly due to resilient global demand and the need to replenish inventories.
Goldman Sachs forecasts that Gulf oil exports will return to pre-conflict levels by the end of July, with crude production expected to fully recover by October. The bank estimates that normalization could add approximately 13 million barrels per day in Hormuz oil flows, restoring volumes to about 70 per cent of pre-conflict levels.
Despite the recent decline, BNP Paribas maintained that oil prices are unlikely to return to levels seen before the conflict. The bank described $75 per barrel as a “durable floor for the foreseeable future,” citing ongoing supply constraints and strong global demand.
The latest development signals a potential easing of pressure on global energy markets, although analysts say geopolitical risks in the region remain a key factor for investors.
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