Oil prices extended their decline, with Brent crude falling below $80 per barrel following an announced agreement between the United States and Iran to end their conflict. The deal marked the fifth consecutive day of losses for the international benchmark, reflecting trader expectations that Iranian oil will soon return to global markets.
The framework agreement centers on reopening the Strait of Hormuz, a critical waterway that was effectively closed during the nearly three-month conflict that began on February 28. US President Donald Trump announced that the strait would reopen under the deal, which both sides have digitally signed and plan to formalize with a ceremonial signing in Geneva on Friday.
Market observers noted that oil prices remain significantly elevated despite the recent selloff. A barrel of Brent crude now trades around $80, compared to approximately $70 before the conflict began. The $20 price difference underscores the substantial impact the war had on energy markets.
Analysts cautioned that the market response should be measured. Warren Patterson, head of commodities strategy at ING, told Reuters: "We've been at this stage before, only for talks to break down. Therefore, the market will likely be more cautious about overreacting." Giovanni Staunovo, a UBS analyst, emphasized that physical oil flows remain the key factor to watch, noting that flows through the strait remain restricted despite the agreement.
Even with the deal in place, experts predict that a return to normal oil flows will require months. Damaged energy infrastructure in Qatar and elsewhere must be repaired before exports can reach previous levels. Barclays maintained its average Brent crude forecast of $100 for the year, though acknowledged risks it could climb higher.
The agreement's announcement sparked broader market movements. Stock markets rose on the news, with Japan's Nikkei climbing nearly 3 percent and the pan-European Stoxx 600 index gaining 1 percent. The dollar dipped 0.3 percent against major currencies, while the pound gained almost 0.6 percent to its highest level since mid-May. Gold climbed 1.46 percent to $4,574 per ounce.
Stephen Innes, an independent analyst, observed that markets responded positively to the prospect of the Strait of Hormuz reopening to normal operations. He noted that the reaction made sense given how much inflation fear and hawkish rate expectations had been built into markets during the recent energy shock.
The higher oil prices and costs for materials like fertilizer had driven inflation concerns worldwide, causing central banks to shift expectations toward rate increases rather than cuts. The agreement's announcement has prompted markets to recalibrate those economic forecasts, though analysts remain cautious about how quickly and completely normal energy flows will resume.