Following the signing of the interim agreement between the US and Iran, market expectations for the resumption of Middle Eastern oil supplies quickly rose, and international oil prices continued to decline. WTI crude oil fell below $74 per barrel on Thursday, and Brent crude oil fell below $77 per barrel, both reaching their lowest levels since early March.
This decline continues the correction that began in April. As traders re-priced in the possibility of disrupted supply returning to global markets, crude oil prices have fallen by approximately 38% from their April highs.
Strait of Hormuz Resumes Navigation
US President Trump said the United States and Iranian President Pezechiyan have signed a provisional agreement and will move forward with broader negotiations over the next 60 days.
One of the key provisions of the agreement is the immediate reopening of the Strait of Hormuz. This waterway carries a significant proportion of global crude oil and liquefied natural gas transport and has been one of the most concerning risks in the energy market recently.
With increased expectations of the Strait of Hormuz reopening, market concerns about prolonged shipping disruptions and supply shortages have eased significantly. At least 10 commercial vessels had already passed through the Strait of Hormuz on Thursday morning, indicating that maritime transport is recovering.
Gulf oil-producing countries may resume exports
The market is also beginning to focus on the possibility of a rebound in production and exports in the Gulf region. Major oil-producing countries such as Saudi Arabia, the UAE, and Iraq may resume millions of barrels per day of production that were previously disrupted due to the situation.
Shipping data also shows that the situation is improving. Saudi oil tankers, as well as ships carrying liquefied natural gas and refined petroleum products, have resumed sailing from Gulf export terminals.
For the energy market, the return of new supply has become the main factor currently suppressing oil prices. Compared to geopolitical risks that dominated market sentiment a few weeks ago, traders are now more focused on the speed of export recovery.
Low inventory levels continue to provide support.
However, the decline in oil prices does not mean that the risks have completely disappeared. US Defense Secretary Hergsays stated that Washington is prepared to reimpose what it calls a "strong blockade" if Iran fails to comply with the terms of the agreement.
The agreement also includes a $300 billion reform proposal targeting Iran, but core issues surrounding Iran's nuclear program remain unresolved and are expected to be addressed in the next phase of negotiations.
Meanwhile, crude oil inventories at Cushing, Oklahoma, remain at relatively low levels. As the largest crude oil storage hub in the United States and the delivery point for WTI futures, Cushing's current inventory is approximately 20 million barrels, indicating that spot supply is not ample.
In the short term, market focus has shifted from the risk of escalating conflict to expectations of shipping recovery and increased production. Whether the US-Iran agreement can bring sustained stability will continue to influence the next move in WTI and Brent crude oil prices.
