Oil markets extended their decline on Thursday after US President Donald Trump and Iranian President Masoud Pezeshkian signed a Memorandum of Understanding aimed at ending the conflict between the two countries and reopening the Strait of Hormuz, a critical global energy route.
The agreement sparked optimism among traders that months of war-related disruption to energy supplies could ease, helping stabilise inflationary pressures that had been fuelled by fears of blocked Gulf oil flows. The Strait of Hormuz, through which around one-fifth of global crude shipments normally pass, had been effectively closed amid the US-Iran conflict that escalated in late February.
According to officials cited by Pakistan’s Prime Minister Shehbaz Sharif, who helped mediate the talks, Iran will immediately reopen the strait while the United States will lift its naval blockade of Iranian ports as part of the initial implementation steps.
Markets responded quickly, with crude prices falling further and extending losses of more than 15 per cent since speculation about a possible agreement first emerged. Analysts said the deal reduced the “war risk premium” that had been built into oil prices due to supply disruption fears.
However, broader financial sentiment remained mixed. While some Asian equity markets rose on easing energy concerns, others declined as investors weighed the likelihood of tighter monetary policy in the United States. The Federal Reserve, under its new leadership, signalled that persistent inflation remains a concern and that interest rate hikes could still be on the table before the end of the year.
Officials also noted that the US side would waive certain oil-related sanctions on Iran, while Tehran would take steps to dilute enriched uranium stockpiles as part of ongoing negotiations towards a more comprehensive settlement.
