Global oil prices tumbled on Thursday, falling to their lowest levels since the outbreak of the US-Iran conflict, as a temporary agreement between Washington and Tehran eased fears over disruptions to crude supplies.
According to Reuters, Brent crude futures dropped by $1.53, or 1.9 per cent, to $78.02 per barrel, while U.S. West Texas Intermediate (WTI) crude declined by $2.22, or 2.9 per cent, to $74.57 per barrel.
The decline pushed Brent to its weakest level since trading resumed after the initial US-Israeli strikes on Iran, while WTI touched its lowest point since early March.
Market sentiment shifted after the United States and Iran signed a 14-point memorandum of understanding aimed at reducing tensions and restoring stability to global energy markets.
The agreement launched a 60-day negotiation process during which Iran will guarantee safe and toll-free passage through the Strait of Hormuz, one of the world’s most important oil and gas transit routes.
The deal also includes plans to restore shipping activities through the strategic waterway to full capacity within 30 days.
The selloff extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent U.S.-Iran memorandum of understanding,” IG market analyst Tony Sycamore said.
Analysts expect crude exports through the Strait of Hormuz to gradually recover, although they warn that oil prices are unlikely to collapse completely due to strong global demand and the need to replenish inventories.
Investment bank Goldman Sachs forecasts that Gulf oil exports will return to pre-conflict levels by the end of July, with full production recovery expected by October.
The bank estimates that the normalisation process could add around 13 million barrels per day in oil flows through the Strait of Hormuz, restoring volumes to about 70 per cent of levels recorded before the conflict.
Despite the sharp decline, BNP Paribas believes crude prices are unlikely to return to levels seen before tensions erupted between the United States and Iran.
The bank expects $75 per barrel to serve as a long-term price floor, citing continued supply constraints and resilient global demand.
The latest drop in oil prices comes as markets respond positively to signs of de-escalation in the Middle East, with investors hopeful that improved relations between Washington and Tehran could reduce supply risks and stabilise energy markets.
However, analysts caution that geopolitical uncertainties and strong demand fundamentals are likely to keep crude prices elevated compared to pre-conflict levels.
