Oil prices plummeted after the US and Iran reached a peace agreement, leading to a significant drop in prices as the Strait of Hormuz is set to reopen. Brent crude, the global oil benchmark, fell 3.8% to $84.02 per barrel, while US-traded oil dropped 4.1% to $81.40.
The formal signing of the agreement is scheduled for Friday in Switzerland, as confirmed by Pakistan. Although specific details are yet to be finalized, Iranian state media has outlined a 14-point memorandum of understanding, including the lifting of the US naval blockade within 30 days and the reopening of the Strait of Hormuz under Iranian control.
The closure of the strait, responsible for transporting about 20% of the world’s oil and gas supplies, has been in effect since airstrikes on Iran by the US and Israel in February. President Trump celebrated the deal on Truth Social, emphasizing the resumption of global oil flow and claiming to bring peace and security to the region.
In an interview with the New York Times, Trump assured that the agreement guarantees the Strait of Hormuz to be toll-free permanently. Despite the agreement, petrol prices have continued to rise since February, reaching an average of 158.52p per liter in May, according to the RAC.
Even with the potential reopening of the Strait of Hormuz, investment bank JP Morgan anticipates global oil prices to remain in the “low $100s” for the year, with a gradual return to normal oil supply levels in the region expected.
