Global oil prices fell to their lowest levels since March on Monday after indications that the United States and Iran are moving closer to an agreement aimed at ending the conflict in the Middle East and reopening the Strait of Hormuz to international shipping.
Brent crude futures declined by US$3.58, or 4.1 percent, to US$83.75 per barrel, while U.S. West Texas Intermediate (WTI) crude fell by US$4.01, or 4.7 percent, to US$80.87 per barrel. Both benchmarks had already recorded losses of more than 3 percent on Friday.
The decline followed announcements from U.S. President Donald Trump and Iranian officials indicating progress toward an initial agreement to ease tensions in the region.
Pakistan, which has been acting as a mediator in the negotiations, stated that the United States and Iran are expected to sign a memorandum of understanding in Switzerland later this week.
President Trump also announced that the Strait of Hormuz would be reopened to global shipping and that restrictions affecting Iranian ports would be lifted under the proposed arrangement.
Iran’s semi-official Mehr News Agency reported that the draft agreement includes plans to reopen the Strait of Hormuz within 30 days under arrangements coordinated by Iran.
Market analysts noted that the prospect of restoring oil flows through the strategic waterway has significantly reduced geopolitical risk premiums that had previously driven oil prices higher.
“The geopolitical risk premium built into crude prices is now being unwound as traders anticipate a resumption of oil exports and shipping through the Strait of Hormuz,” analysts said.
The conflict had disrupted millions of barrels of global oil and gas supplies after the closure of the Strait of Hormuz, through which approximately one-fifth of the world’s oil and liquefied natural gas shipments normally pass.
Investors are also closely monitoring how quickly Middle Eastern oil producers can restore production and exports following damage caused by the conflict.
Iranian Deputy Foreign Minister Kazem Gharibabadi stated that broader negotiations would continue during a proposed 60-day ceasefire period.
Meanwhile, the E4 nations — the United Kingdom, France, Germany, and Italy — signalled their willingness to consider easing sanctions on Iran in response to progress on its nuclear programme.
Despite the recent decline in oil prices, analysts caution that uncertainty surrounding future negotiations and regional stability may continue to influence global energy markets in the weeks ahead.
Source: Reuters
