Oil Prices Decline Sharply After US-Iran Preliminary Peace Agreement Announced
Oil prices witnessed a notable decline, touching their lowest levels since last March on Monday, following the announcement by US President Donald Trump and Iran's Deputy Foreign Minister of a preliminary agreement between the two countries aimed at ending the conflict and restoring navigation in the vital Strait of Hormuz. Brent crude futures registered a decrease of $4.03, or 4.61%, reaching $83.30 per barrel by 04:08 GMT. US West Texas Intermediate (WTI) crude also fell by $4.28, or 5.04%, settling at $80.60. Both contracts had experienced a drop of more than 3% last Friday, according to media reports. In a related context, Pakistani Prime Minister Shehbaz Sharif, whose country is playing a mediating role in the negotiations, stated that the United States and Iran intend to sign a memorandum of understanding in Switzerland next Friday. President Trump had announced last Sunday that the Strait of Hormuz would be reopened "without any fees," also indicating that the US naval blockade imposed on Iranian ports would be lifted. Confirming the draft agreement, a semi-official Iranian news agency indicated that the Strait would be reopened within 30 days, under Iranian arrangements. In this regard, Tim Waterer, Senior Market Analyst at KCM Trade, explained that "the geopolitical risk premium, which has long been reflected in crude oil prices, is now being dismantled at a rapid pace, as traders anticipate the resumption of oil flows." The closure of the Strait of Hormuz for over three months, a consequence of the conflict, had deprived global markets of millions of barrels of oil and gas supplies. The Strait is considered a highly strategic maritime passage, through which approximately one-fifth of the world's oil and liquefied natural gas (LNG) supplies passed before the conflict. Investors are paying particular attention to monitoring the pace of resumption of oil production and exports from producing countries in the Middle East, following the damage incurred during the war, in addition to observing whether more commercial vessels will enter the region. For his part, Iranian Deputy Foreign Minister Kazem Gharibabadi stated that a broader agreement would be negotiated during the 60-day ceasefire period. Britain, France, Germany, and Italy expressed their readiness last Sunday to lift sanctions imposed on Iran, in exchange for concrete steps taken by Tehran regarding its nuclear program.
