Oil markets saw sharp declines following an announcement that the United States and Iran had reached an agreement to reopen the Strait of Hormuz and end military actions in the Middle East. The deal is expected to restore a key shipping route that had been blocked since early March, significantly affecting global oil flows.
As of 9:51 AM (Bangkok time), U.S. crude futures dropped over 5% to $80.10 a barrel, reaching their lowest since March 10. International benchmark Brent for August delivery slipped about 4.69% to $83.23, also hitting a multi-month low.
President Donald Trump confirmed the completion of the agreement with Iran to reopen the strait, stating that the area will be accessible without tolls and that U.S. naval restrictions on Iran would also be lifted. Trump further outlined that the key oil waterway will reopen on Friday, coinciding with a planned signing ceremony for the formal peace deal in Switzerland.
Before the closure, approximately 20% of the world’s oil shipments passed through the Strait of Hormuz. Disruptions resulting from attacks earlier in the year had caused a historic supply shock, reducing tanker traffic and impacting global energy markets.
Pakistan has played a mediating role in the negotiations. Prime Minister Shehbaz Sharif announced on Sunday the immediate and permanent end of military operations between the U.S. and Iran, including areas such as Lebanon. He noted that mediators and officials will hold additional meetings this week ahead of technical discussions and the formal signing event.
Market analysts observed that the decline in crude prices is tied directly to expectations that oil supply will recover soon, reducing the geopolitical risk premium that had previously supported prices.
Resumed movement through the Strait of Hormuz could quickly lead to increased ship traffic, with oil flows potentially nearing pre-disruption levels. However, concerns remain among investors about how rapidly Middle Eastern producers can restore output and shipping capacity after months of conflict-related damage.
Iran’s deputy foreign minister indicated that a broader agreement would be discussed during a 60-day ceasefire. Meanwhile, the coalition of European nations known as the E4, which includes the United Kingdom, France, Germany, and Italy, stated they are ready to consider lifting sanctions if Iran takes further steps related to its nuclear program.
While the deal has triggered immediate downward pressure on oil prices, some market participants note that the pace of recovery in oil flows and the outcome of further negotiations could determine the direction of prices in the near term.
