Markets react positively as agreement paves the way for reopening the Strait of Hormuz.
Image: Daily Sun
Oil prices dropped more than 4% on Monday after the United States and Iran announced a peace agreement aimed at ending the conflict and restoring shipping through the Strait of Hormuz.
Brent crude fell 4.1% to $83.75 per barrel, while US West Texas Intermediate (WTI) dropped 4.7% to $80.87.
The decline came after US President Donald Trump and Iranian officials confirmed an initial agreement to end hostilities. A memorandum of understanding is expected to be signed in Switzerland on Friday.
The deal includes reopening the Strait of Hormuz, a key route that handles around one-fifth of global oil and liquefied natural gas supplies.
Analysts said the easing of geopolitical tensions has reduced the risk premium that had pushed oil prices higher during the conflict.
However, markets remain cautious as further negotiations on sanctions relief and Iran’s nuclear programme are expected during a 60-day ceasefire period.
Experts believe oil prices could remain volatile until there is greater clarity on how quickly energy exports and shipping activity return to normal levels.
