WASHINGTON: Global oil prices fell to their lowest level since March after reports emerged that the United States and Iran had reached a preliminary understanding to end hostilities and restore shipping through the Strait of Hormuz.
Brent crude dropped 4.1% on Monday to $83.75 per barrel, while US West Texas Intermediate (WTI) fell 4.72% to $80.87 per barrel. Both benchmarks had already declined by more than 3% on Friday.
US President Donald Trump and Iranian Deputy Foreign Minister Kazem Gharibabadi confirmed that the two sides had reached an initial understanding aimed at ending the conflict and reopening the Strait of Hormuz.
Pakistan, which has played a mediating role in the talks, said the parties are expected to sign a memorandum of understanding in Switzerland on Friday. Prime Minister Shehbaz Sharif said the agreement would mark a significant step toward de-escalation.
Trump said the Strait of Hormuz would be reopened as a “toll-free” passage. He also announced the end of the US naval blockade on Iranian ports.
Iran’s Mehr News Agency reported that the proposed agreement calls for the full restoration of maritime traffic through the strategic waterway within 30 days.
Market analysts said the geopolitical risk premium that had driven oil prices higher during the conflict is rapidly fading. Investors are increasingly pricing in expectations of renewed oil flows and improved supply conditions.
The Strait of Hormuz has remained largely closed for more than three months, disrupting global energy markets and restricting the movement of millions of barrels of oil and gas each day. The waterway handles nearly one-fifth of the world’s oil and liquefied natural gas shipments.
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Meanwhile, the E4 countries — Britain, France, Germany and Italy — signaled that they could ease sanctions on Tehran if progress is made on Iran’s nuclear program.
Analysts cautioned that uncertainty remains. While the ceasefire and diplomatic breakthrough have eased immediate market concerns, upcoming nuclear negotiations and broader regional developments could limit further declines in oil prices over the next two months.
