Oil Prices Drop to Lowest Level Since US-Iran Conflict Began After Supply Deal

Oil prices have dropped sharply to their lowest levels since the beginning of the US-Iran conflict, following an interim agreement between Washington and Tehran that improved expectations for increased global crude supply.

According to market reports, Brent crude futures declined by $1.53, representing a 1.9 per cent fall, trading at $78.02 per barrel, while US West Texas Intermediate (WTI) crude dropped by $2.22, or 2.9 per cent, to $74.57 per barrel.

The decline in oil prices came as investors reacted positively to the possibility of more Iranian crude entering the international market after the United States and Iran reached a memorandum of understanding aimed at reducing tensions. 

Brent crude recorded its lowest level since the first trading session after the initial US-Israeli strikes on Iran, while WTI reached its weakest point since early March.

IG market analyst Tony Sycamore said the market selloff was linked to expectations of a faster return of Iranian oil supplies following the agreement between both countries.

The agreement reportedly creates a 60-day negotiation period during which Iran will allow free passage through the Strait of Hormuz, one of the world’s most important routes for oil and gas transportation.

The deal also includes plans to restore shipping activities through the waterway to full capacity within 30 days, easing concerns over possible disruptions to global energy markets.

Analysts, however, believe that while Iranian oil exports could gradually increase, prices may not experience a major collapse due to strong global demand and the need for countries to rebuild depleted inventories.

Goldman Sachs expects Gulf oil exports to recover to pre-conflict levels by the end of July, with crude production potentially returning fully by October.

BNP Paribas also stated that it does not expect oil prices to return to previous levels, predicting that $75 per barrel could remain a stable support level due to ongoing supply challenges and steady demand.