Global oil prices fell in early trading on Thursday following the signing of an interim agreement between the United States and Iran aimed at ending hostilities, reopening the Strait of Hormuz, and easing restrictions on Iranian oil exports.
Brent crude futures fell by 89 cents, or 1.12 percent, to US$78.66 per barrel, while U.S. West Texas Intermediate (WTI) crude declined by 98 cents, or 1.28 percent, to US$75.81 per barrel.
The decline extended losses recorded earlier in the week as markets reacted positively to the prospect of improved global energy supplies and reduced geopolitical risks in the Middle East.
Market analysts said traders were increasingly pricing in a faster-than-expected return of Iranian oil exports following the memorandum of understanding signed between Washington and Tehran.
The 14-point agreement reportedly initiates a 60-day negotiation period during which Iran will allow unrestricted passage through the Strait of Hormuz, one of the world’s most important oil and gas shipping routes. The deal aims to restore traffic through the strait to full operational capacity within 30 days.
While the agreement addresses immediate concerns surrounding energy supply disruptions, several complex issues, including Iran’s nuclear programme, have been deferred to future negotiations.
According to reports, the preliminary arrangement also includes plans for the United States and its international partners to develop a substantial economic recovery package for Iran.
The development has prompted renewed discussions about the future balance between global oil supply and demand. The International Energy Agency (IEA) has cautioned that if Middle Eastern oil exports return fully to global markets, supply could significantly exceed demand by 2027.
Meanwhile, investors are also closely monitoring developments in U.S. monetary policy. The U.S. Federal Reserve has indicated growing concern over inflationary pressures, with some policymakers suggesting that further interest rate increases may be necessary later this year.
Higher interest rates could slow economic growth and potentially reduce global demand for energy, adding further downward pressure on oil prices.
Analysts note that while the interim agreement has improved market sentiment, oil prices are likely to remain sensitive to developments in the Middle East and the progress of future negotiations between the United States and Iran.
Source: Reuters
