Oil prices dropped over $2 per barrel on Thursday following an interim agreement between the U.S. and Iran aimed at ending the Iran war, reopening the Strait of Hormuz, and lifting U.S. sanctions on Iranian oil. Brent crude futures fell by $2.14, or 2.69%, to $77.41 a barrel, while U.S. West Texas Intermediate (WTI) dropped $2.36, or 3.07%, to $74.43 a barrel. This decline marks Brent’s lowest level since early March, coinciding with increased tensions in the region.
The market’s sell-off was fueled by the expectation of a quicker return of Iranian oil to the market. The recent U.S.-Iran memorandum initiates a 60-day negotiation period for toll-free passage through the Strait of Hormuz, a critical shipping lane, with full capacity restoration anticipated within 30 days. However, analysts caution that supply may remain tight, as some oil has already circumvented the strait and shipowners might hesitate to return to the area due to potential instability.
Concerns over rising interest rates by the U.S. Federal Reserve also weigh on the oil market, as a rate hike could stifle economic growth and reduce oil demand. The Fed’s shifting stance indicates that nine policymakers now foresee a necessary rate increase, contrasting with previous projections.
