Oil prices fell to their lowest point since March on Monday following statements from U.S. President Donald Trump and Iran’s deputy foreign minister, indicating that an initial agreement had been made to conclude the conflict and resume shipping through the Strait of Hormuz. Brent crude futures decreased by $3.58, representing a 4.10% drop, settling at $83.75 per barrel. Meanwhile, U.S. West Texas Intermediate crude saw a decline of $4.01, or 4.72%, bringing it down to $80.87. Both benchmarks had already declined by over 3% on Friday. “The Deal with the Islamic Republic of Iran is now complete,” Trump stated on his Truth Social platform. “Ships of the world, commence operations.” He added “Let the oil flow.”
On Sunday, Trump stated that vessels would be allowed to navigate the Strait of Hormuz “toll free” and announced the lifting of a U.S. naval blockade on Iranian ports. Pakistan, having taken on the role of mediator between the two parties, announced that the U.S. and Iran are set to sign a memorandum of understanding in Switzerland on Friday. According to reports, the draft agreement contains a clause that allows for the reopening of the Strait of Hormuz within a 30-day timeframe, with oversight provided by Iran. The country’s Deputy Foreign Minister Kazem Gharibabadi indicated that discussions regarding a more comprehensive agreement would persist throughout the suggested 60-day ceasefire period.
The agreement also encompasses Lebanon, a territory that has consistently been one of the most disputed topics in the discussions, with Israel and Hezbollah persisting in their exchanges of attacks despite numerous appeals from Trump and others to cease hostilities in recent weeks. The closure of the Strait of Hormuz for over three months has led to a significant reduction in the supply of millions of barrels of oil and gas in global markets. The waterway serves as a crucial channel for approximately 20% of global oil and liquefied natural gas transportation. Market participants are currently paying close attention to the pace at which producers in the Middle East can resume oil output and exports following wartime disruptions. Investors are closely monitoring the potential resurgence of shipping traffic in the region.
Experts warned that even if the ceasefire remains intact, it could take months for shipping through the Strait of Hormuz to return to normalcy. They noted that any damage to energy infrastructure could further impede the recovery process. Last month, Saudi Aramco Chief Executive Officer Amin Nasser cautioned that interruptions in the Strait of Hormuz might delay stability in global oil markets until 2027. He stated that extended disruptions could impact almost 100 million barrels of oil supply on a weekly basis. Saudi Aramco continues to hold its position as the largest oil producer globally.