Oil prices dipped during early Thursday trading after the United States and Iran reached an interim agreement that would bring the Iran war to a close, reopen the Strait of Hormuz, and remove American sanctions on Iranian oil exports — a development being described as a resolution to the most significant energy supply disruption the world has ever seen.
Brent crude futures dropped 89 cents, or 1.12%, settling at $78.66 per barrel as of 0005 GMT. Meanwhile, U.S. West Texas Intermediate crude slid 98 cents, or 1.28%, to $75.81 per barrel.
Both benchmarks resumed a downward trend after briefly climbing Wednesday, when U.S. President Donald Trump warned he could restart his bombing campaign if Iran’s leaders “don’t behave.”
IG market analyst Tony Sycamore explained the continued price drop in a written note: “The sell-off 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.”
The agreement, which spans 14 points, launches a 60-day period of negotiations. During that time, Iran has agreed to allow ships to pass through the Strait of Hormuz — a vital corridor for oil and natural gas shipments — without charging tolls. Under the terms of the deal, full shipping capacity through the strait must be restored within 30 days.
However, the preliminary accord leaves some of the thorniest issues unresolved, including Iran’s nuclear program. It also requires the U.S. and its partners to develop a $300 billion plan to help fund Iran’s recovery.
The International Energy Agency cautioned Wednesday that if the deal holds and the strait is fully reopened, the current supply crisis could reverse course dramatically — potentially creating a supply glut of 5.05 million barrels per day in 2027 as Middle Eastern oil flows back into global markets.
Adding another layer of complexity, the U.S. Federal Reserve is weighing whether it may need to raise interest rates later this year to combat inflation. Higher rates could slow economic growth and reduce demand for oil. Wednesday projections revealed that nine of 19 Fed policymakers now believe a rate hike will be necessary — a sharp shift from three months ago, when none of them held that position.
