Oil Prices Plunge on Ceasefire Deal as US-Iran Tensions Ease and Strait of Hormuz Reopens

Oil Prices Plunge on Ceasefire Deal as US-Iran Tensions Ease and Strait of Hormuz Reopens​

Oil prices fell sharply on Thursday, hitting their lowest levels since the commencement of hostilities following the initial U.S.-Iran strikes. The significant selloff was driven by an interim agreement reached between the United States and Iran aimed at de-escalating the conflict. This deal provides a boost to global supply outlook by setting mechanisms for the reopening of the Strait of Hormuz and easing sanctions on Tehran.

Market Plummets as Deal Signals Supply Increase​

Global crude futures took a significant downturn in reaction to the memorandum of understanding. Brent crude futures were down $1.02, or 1.28%, closing at $78.53 a barrel at 1036 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) oil saw an even sharper decline, falling by $1.48, or 1.93%, to reach $75.31 a barrel.

The movements mark Brent's lowest point since March 2, which was the first trading day following the initial U.S.-Israeli strikes on Iran. Similarly, WTI oil registered its low for the period since March 4. Market analysts noted that the selloff reflected aggressive pricing of an expected rapid return of Iranian barrels subsequent to the memorandum.

Terms and Timeline of the US-Iran Accord​

The fourteen-point memorandum establishes a defined trajectory for de-escalation over the coming months. Under the terms, Iran will allow toll-free passage through the Strait of Hormuz, which is recognized as a critical shipping lane for both oil and gas. The deal mandates that traffic flow through the strait must be restored to its full capacity within 30 days.

The preliminary accord defers several complex issues, such as Iran's nuclear program. Additionally, it calls upon the United States and its partners to develop a $300 billion financial plan intended to support Iran's post-conflict recovery. Industry experts, however, have cautioned that price declines may be limited as demand recovers and inventories are refilled globally.

Analyst Views on Normalization and Price Floor​

Financial institutions offered varying perspectives on the speed of market recovery following the agreement. Goldman Sachs anticipates a normalization of Gulf exports back to pre-war levels by the end of July. The bank further estimates that crude production could recover entirely by October.

Goldman Sachs suggests that achieving export parity with pre-war levels requires an increase in Hormuz flows of 13 million barrels-per-day, bringing them up to approximately 70% of their previous capacity. BNP Paribas holds a more conservative stance, stating it does not expect a return to pre-war prices. The bank views $75 per barrel as a "durable floor for the foreseeable future," citing ongoing supply losses and high demand.

Global Energy Dynamics and Geopolitical Tensions​

In other market developments, China is forecast to consume 753 million metric tons in 2026, representing a 4.9% decrease from 2025 levels. This adjustment comes amidst pivot towards new energy sources alongside prevailing high oil prices, according to PetroChina's research unit.

Simultaneously, the geopolitical landscape remains volatile as Ukrainian drones struck Russia's capital oil refinery for the second time this week. Kyiv has cast these actions as a demonstration of its rapidly increasing military capabilities.