New York (TDI): Oil prices declined in early trading on Thursday following the signing of an interim agreement between the United States and Iran aimed at ending the war, reopening the Strait of Hormuz, and easing US sanctions on Iranian crude exports.
Brent crude futures fell by 89 cents, or 1.12%, to $78.66 per barrel as of 0005 GMT, while US West Texas Intermediate (WTI) dropped 98 cents, or 1.28%, to $75.81 per barrel.
The decline extended losses from earlier in the week as markets reacted to expectations that Iranian oil supplies could return to global markets sooner than previously anticipated under the framework deal, according to Reuters.
“The sell-off extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent US-Iran memorandum of understanding,” IG market analyst Tony Sycamore said.
Read More: Trump Says Oil Tankers Are Leaving Hormuz as Shipping Recovery Begins
The 14-point memorandum, which begins a 60-day negotiation period toward a final settlement, provides for toll-free passage through the Strait of Hormuz and calls for the restoration of normal shipping levels within 30 days. It also outlines a broader plan for sanctions relief and a potential $300 billion reconstruction and development fund supported by regional partners.
However, key issues, including Iran’s nuclear program, remain unresolved and will be addressed in subsequent negotiations.
Market analysts warned that if the agreement is fully implemented and Iranian exports return at scale, global oil markets could swing from shortage to surplus in the coming years. The International Energy Agency has projected that supply could exceed demand significantly by 2027 as Middle Eastern output returns.
Read More: Oil Prices Hit Three-Month Low as US-Iran Deal Eases Supply Fears
At the same time, concerns over global economic growth and interest rate policy continue to weigh on demand outlooks, with several US Federal Reserve officials signalling openness to future rate hikes to contain inflation.
