Oil prices fell to their lowest levels since March after the United States and Iran announced a preliminary agreement to contain geopolitical tensions and resume maritime traffic through the Strait of Hormuz. The move led to a sharp decline in the geopolitical risk premium that had supported prices over the past months.
Brent crude dropped by about $4 per barrel, while West Texas Intermediate fell by more than 5%, extending losses from previous sessions as optimism increased over the return of energy flows from the region.
According to official statements, Washington and Tehran are expected to sign a memorandum of understanding in Switzerland in the coming days, as part of an agreement aimed at reopening the Strait of Hormuz and lifting restrictions on maritime shipping. Iranian reports also indicated that the draft agreement includes restarting the key shipping route within 30 days under Iranian arrangements.
Analysts believe markets have started to price in the possibility of a gradual return of oil and gas exports to normal levels, after regional tensions and the closure of the Strait of Hormuz for more than three months disrupted millions of barrels from global supply. The strait is one of the world’s most important energy routes, with around one fifth of global oil and liquefied natural gas trade passing through it.
Despite the sharp decline in prices, markets are still watching how quickly production and exports from Middle Eastern countries can resume, as well as the ability of damaged infrastructure to return to operation. Investors are also monitoring the parties’ commitment to the terms of the agreement and the possibility of reaching broader understandings in the coming period.
In a supportive development, Britain, France, Germany and Italy said they were ready to consider easing sanctions on Iran in exchange for additional steps related to its nuclear program.
Analysts note that lower geopolitical tensions do not mean an immediate return to previous conditions, as the damage to energy infrastructure and the economic pressure faced by oil importing countries over recent months will take time to fully fade.
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