Global oil prices tumbled on Thursday, falling to their lowest levels since tensions between the United States and Iran escalated, after a new interim agreement between the two countries raised expectations of increased crude supplies in the global market.
Brent crude futures dropped by $1.53, or 1.9 percent, to $78.02 per barrel by 1326 GMT, while U.S. West Texas Intermediate (WTI) crude declined by $2.22, or 2.9 percent, to $74.57 per barrel, according to Reuters.
The decline pushed Brent to its weakest level since trading resumed after the initial U.S.-Israeli strikes on Iran, while WTI touched its lowest point since early March.
Investor sentiment shifted following the signing of a 14-point memorandum of understanding between Washington and Tehran aimed at reducing regional tensions and restoring stability to energy markets.
“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,” said IG market analyst Tony Sycamore.
Under the agreement, Iran will permit toll-free passage through the Strait of Hormuz during a 60-day negotiation period. The pact also outlines plans to restore shipping traffic through the strategic waterway to full operational capacity within 30 days.
The Strait of Hormuz is a critical route for global oil and gas shipments, and any improvement in its operations is expected to boost international energy supplies.
Industry analysts anticipate a gradual increase in oil exports through the channel, although they caution that strong global demand and the need to replenish inventories could limit further declines in crude prices.
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 normalisation efforts could increase Hormuz oil flows by approximately 13 million barrels per day, restoring volumes to about 70 percent of levels seen before the conflict.
Despite the recent market downturn, BNP Paribas maintains that oil prices are unlikely to return to pre-conflict levels. The bank believes $75 per barrel will remain a sustainable price floor in the near term, supported by ongoing supply limitations and steady global demand.
