Oil falls to lowest level since Iran war began

US-Iran Peace Deal Sends Oil to Lowest Level Since War Began

Oil prices fell to their lowest levels since the start of the Iran conflict this week after the United States and Iran signed a preliminary memorandum of understanding to end hostilities, reopen the Strait of Hormuz, and ease sanctions on Iranian oil exports.

In European trading on Thursday, Brent crude dropped 1.2% to $78.62 per barrel, while West Texas Intermediate fell 1.8% to $74.64, according to The Wall Street Journal. Both benchmarks posted weekly declines exceeding 13%. CNBC reported Brent at $78.64 and WTI at $75.46 in early U.S. trading Thursday.cnbc

The Agreement

The 14-point memorandum was signed Wednesday by President Trump at the Palace of Versailles during the G7 summit, with Iranian President Masoud Pezeshkian and Pakistani Prime Minister Shehbaz Sharif, who mediated the negotiations. The deal declares an “immediate and everlasting cessation of military actions across all fronts, including Lebanon,” and commits both sides to negotiate a final agreement within 60 days.npr

Under the terms, the U.S. will dismantle its naval blockade of Iranian ports within 30 days, while Iran will immediately reopen the Strait of Hormuz to commercial shipping. U.S. Central Command confirmed Thursday that the blockade had already been lifted. The agreement also commits the U.S. to facilitating a $300 billion reconstruction fund for Iran and lifting all sanctions according to a mutually agreed schedule.independent

Iran’s Supreme Leader approved the accord, though he said he maintains a “different perspective” on the matter. Iran reaffirmed its commitment not to acquire nuclear weapons, but the handling of enriched materials and future enrichment will be determined in the final agreement.bbc

Market Impact and Outlook

Goldman Sachs cut its fourth-quarter Brent forecast to $80 from $90 and now expects Gulf exports to normalize to pre-war levels by the end of July, about a month sooner than previously anticipated. Morgan Stanley projects full production recovery by early 2027.boereport

Goldman’s Daan Struyven noted that while prices have fallen sharply from over $120, oil remains roughly $20 per barrel above pre-war levels due to depleted inventories and lingering geopolitical risk. The International Energy Agency warned of a “major oversupply developing next year”.goldmansachs

Unresolved Tensions

Vice President JD Vance defended the deal Thursday as a “victory for the American populace” but issued a blunt warning to Israel, which has continued military operations in Lebanon. “If I were part of the Israeli government, I might reconsider attacking the only significant ally I have left in the world,” Vance said. Swiss talks to begin final negotiations have already been delayed, with the White House saying arrangements remain unconfirmed.aljazeera