LONDON — Oil prices fell sharply and global stock markets rallied as the United States and Iran reached an interim agreement to end their conflict, with expectations of resumed oil flows through the Strait of Hormuz.
Brent crude dropped more than 4% in early trading following the announcement, while U.S. crude futures also declined significantly. The agreement, signed in recent days and mediated in part by Pakistan, includes a ceasefire and provisions to reopen the vital shipping lane, according to statements from both sides.
The conflict, which escalated in late February with U.S. and Israeli strikes on Iran, had disrupted oil shipments and pushed prices higher earlier in the year. The interim deal establishes a framework for a ceasefire and begins a 60-day period for further negotiations on Iran's nuclear program and sanctions, officials said.
Energy markets reacted swiftly to the prospect of restored Iranian oil exports and normalized tanker traffic. Industry observers noted that the reopening could ease supply concerns that had supported elevated prices during the hostilities. U.S. gas prices also retreated, falling below $4 per gallon nationally amid the developments.
However, uncertainty persists. President Donald Trump has described the memorandum of understanding as not final and indicated that military action could resume if terms are not met. Iranian officials have provided limited public details, and some analysts cautioned that full implementation remains subject to verification.
Stock indices in Asia, including those in Japan, South Korea and Taiwan, rose on the news as investors welcomed reduced geopolitical risk. Broader equity futures in the U.S. and Europe also gained.
The International Energy Agency has projected that global oil supply could significantly exceed demand next year, adding to downward pressure on prices even before the agreement. Market participants continue to monitor developments in the region.
A senior energy trader told Reuters on Wednesday that while the initial reaction was positive for risk assets, "details on timelines for reopening the strait and sanctions relief will determine the sustained impact."
As of Friday, oil prices showed some stabilization after the initial decline, with Brent trading near levels last seen before the escalation intensified. Negotiations for a more comprehensive deal are expected in the coming weeks, though full resolution of outstanding issues remains unclear.
