NAIROBI, Kenya — Global oil prices fell sharply on Monday after the United States and Iran announced a breakthrough agreement that could lead to the reopening of the Strait of Hormuz, easing concerns over disruptions to one of the world’s most important energy shipping routes.
Brent crude, the international benchmark for oil prices, dropped 4.8 per cent to $83.18 per barrel, while West Texas Intermediate (WTI), the US benchmark, fell 5.6 per cent to $80.13 per barrel as markets reacted positively to the prospect of restored oil flows.
The decline followed announcements from Pakistan, which has been mediating negotiations between Washington and Tehran, that a framework agreement had been reached to end months of conflict and tensions in the Gulf region.
Pakistani Prime Minister Shehbaz Sharif said an official signing ceremony is expected to take place in Switzerland on June 19.
US President Donald Trump welcomed the development, posting on social media: “Let the oil flow!”
Iran also signalled that an agreement had been finalised. Deputy Foreign Minister Kazem Gharibabadi told Iranian state television that Tehran and Washington had reached a deal, raising expectations that restrictions affecting regional energy exports could soon be eased.
The Strait of Hormuz, through which nearly 20 per cent of the world’s oil and liquefied natural gas (LNG) supplies pass, has been effectively closed since the outbreak of hostilities earlier this year. The disruption triggered sharp increases in energy prices and heightened concerns about global inflation and economic growth.
Before the conflict, Brent crude traded at about $70 per barrel. Prices surged to nearly $120 during the height of the crisis as traders feared prolonged supply disruptions.
Despite the optimism, analysts cautioned that uncertainty remains over the details of the agreement and the timeline for restoring normal shipping operations.
Vandana Hari, founder of energy market consultancy Vanda Insights, said the absence of detailed information about the agreement could create volatility in energy markets in the coming days.
“The lack of clarity on what exactly has been agreed is likely to inject unease and uncertainty into the market,” she said.
Industry experts also warned that reopening the waterway does not automatically mean an immediate return to normal oil flows.
Andrew Lipow, president of Lipow Oil Associates, noted that any mines or security threats in the Strait would first need to be cleared, a process that could take several weeks or even months. He added that a backlog of oil tankers waiting to transit the route could delay full normalisation of exports.
Financial markets across Asia responded positively to the development. Japan’s Nikkei 225 index rose more than 5 per cent, while South Korea’s Kospi gained over 5.5 per cent in early trading as investors welcomed the prospect of lower energy costs.
