LONDON — Global oil prices fell sharply on Monday and remained under pressure on Tuesday after U.S. and Iranian officials announced a preliminary 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 transit routes.
Brent crude and U.S. West Texas Intermediate futures both declined by about 5% on Monday, according to Reuters market data, after U.S. President Donald Trump said a memorandum of understanding had been signed to end the conflict involving Iran and reopen the strait. The drop brought oil prices to their lowest closing levels since early March, Reuters reported.
The Strait of Hormuz typically carries about one-fifth of global oil supplies, according to Reuters. Shipping through the waterway had been disrupted during the conflict, contributing to higher energy prices and concerns about supply shortages in international markets.
U.S. and Iranian officials said the framework agreement remains preliminary and that negotiations on a broader settlement are continuing. Iranian President Masoud Pezeshkian described the memorandum as “an important step” toward ending the fighting, while noting that a final agreement had not yet been reached, according to Reuters.
Market participants reacted to expectations that oil exports and tanker traffic could gradually resume if the agreement holds. Reuters reported that the proposed arrangement includes a phased reopening of the Strait of Hormuz and an extension of a ceasefire while negotiators address outstanding issues, including Iran’s nuclear program and sanctions.
Energy companies were among the sectors affected by the decline in crude prices. Shares of major oil producers in the United States and Europe fell after investors reduced expectations of prolonged supply disruptions, according to Reuters.
Despite the market reaction, analysts cautioned that a full restoration of energy flows could take time. Reuters reported that challenges remain, including clearing maritime hazards, restoring insurance coverage for shipping operators and bringing suspended production back online.
“The devil may be in the details,” Tim Waterer, chief market analyst at KCM Trade, told Reuters, referring to the limited public information available about the agreement.
On Tuesday, oil prices recovered modestly in early trading as traders assessed the lack of detailed terms and the timeline for restoring supply. Reuters reported that Brent crude rose slightly above $83 per barrel and West Texas Intermediate traded near $81 per barrel, though both benchmarks remained well below levels reached during the conflict.
As of Tuesday, negotiations between Washington and Tehran were continuing, and officials from both countries said details of a permanent settlement and the full reopening of the Strait of Hormuz remained under discussion.
