Global oil prices fell sharply on Monday after the United States and Iran announced a breakthrough agreement aimed at ending months of conflict that had disrupted energy markets and raised concerns over global oil supplies.
In early trading in Tokyo, US benchmark West Texas Intermediate (WTI) crude dropped more than 4 per cent to $81.15 per barrel as investors reacted positively to the prospect of reduced geopolitical tensions in the Middle East.
The decline followed announcements from both Washington and Tehran confirming a peace agreement designed to halt military operations across multiple fronts. According to mediator Pakistan, the deal includes an immediate and permanent cessation of hostilities, including those linked to the conflict in Lebanon.
US President Donald Trump welcomed the development, declaring that the agreement with Iran had been completed. He also announced the reopening of the Strait of Hormuz, one of the world's most critical oil transit routes through which roughly one-fifth of global crude supplies pass.
Trump further stated that the United States would remove its naval blockade and allow unrestricted commercial shipping through the strategic waterway, a move expected to ease concerns over supply disruptions that had supported higher oil prices in recent months.
Iran also confirmed that the agreement would bring an immediate end to the conflict between the two countries.
Despite the market's positive reaction, analysts cautioned that significant challenges remain before a lasting peace can be achieved. Stephen Innes of SPI Asset Management described the agreement as an initial ceasefire framework rather than a final settlement.
According to Innes, investors will now focus on whether the agreement is formally signed, how quickly maritime routes can return to normal operations, and whether all parties, including regional actors, adhere to the terms of the deal.
While the announcement has eased immediate fears of a prolonged disruption to global oil supplies, analysts say markets will continue to monitor implementation of the agreement before fully pricing in a return to stability.
