US-Iran Peace Deal Sparks Immediate Brent Crude Price Drop
Global oil prices have sharply declined amid renewed optimism that a US-Iran peace agreement may resolve the largest energy supply crisis in market history. Brent crude prices fell below $84 a barrel at the start of the new trading week across Asia-Pacific financial centers, driven by expectations that the Strait of Hormuz could soon reopen, restoring Gulf oil exports to the market.
Despite recent Israeli airstrikes on Beirut that threatened to destabilize sensitive negotiations, former US President Donald Trump declared on Sunday that a deal was "now complete." However, many details remain unclear, including the timeline for reopening the maritime route, the authority responsible for ensuring safe passage, and any conditions that may be imposed. Iranian officials have indicated a 60-day negotiation period will follow to address broader issues such as Tehran's nuclear program and sanctions relief.
Oil Market Reaction and Price Movements
The benchmark international oil price traded 4% lower in early Monday trading, extending declines observed on Friday. Prices are now at their lowest since early March, shortly after the onset of the Iran conflict.
Late last week, oil prices began a steep decline from $93 a barrel on Thursday to close at $87.50 on Friday after Trump announced progress with Tehran that would end the regime's effective control over the vital oil trade route.
"The US military had been in recent weeks to help ease the pressure in the global market," Trump also claimed.
Throughout the Iran conflict, oil prices have remained below expectations despite the halt of Gulf oil exports through the Strait of Hormuz in early March, which removed approximately 20 million barrels per day—about one-fifth of global supplies—from the market.
Supply Adjustments and Market Responses
Gulf producers have rerouted around 5 million barrels per day via pipelines to alternative regional export hubs. Additionally, in recent weeks, approximately 2 million barrels per day may have reached the market with assistance from the US military through "dark tankers," which transport cargoes covertly to vessels waiting in the Gulf of Oman before returning to reload.
Furthermore, members of the International Energy Agency (IEA) have released record levels of emergency crude and fuels into the market at an estimated rate of 2.5 million barrels per day.
On the demand side, reductions have also narrowed the global oil supply shortfall. China is estimated to have cut imports by around 4 million barrels per day, reaching lows not seen in a decade. This reduction may be attributed to drawing on record-high inventories and halting aggressive stockpiling. Globally, demand may have decreased by 3 to 4 million barrels per day as petrochemical refineries across Asia have scaled back operations to manage the crisis.
Analyst Perspectives on Market Outlook
Tony Sycamore, an analyst at IG, commented on Monday that countries would likely use the reopening to replenish depleted stockpiles and strategic reserves.
"It is hard to see crude falling much further from here in the near term," he warned, citing the complexity of negotiations, particularly regarding nuclear issues.
Analysts have cautioned that the anticipated surge in energy demand during the northern hemisphere summer could push oil prices higher as global inventories approach concerning lows.
Even if the Strait of Hormuz reopens promptly, the crisis's impact may persist in the market until early next year. Rystad Energy analysts estimate that the conflict has already removed 1 billion barrels of oil from the market.
Rystad Energy's Forecast on Recovery Timeline
The influential consultancy predicts a phased reopening of the strait beginning mid-July following a June peace deal, with a gradual recovery as tankers are repositioned and oilfields restarted.
"Around 85% of lost volumes are expected to be restored by October, with the remaining recovery, dominated by mature fields in Iraq and Kuwait, extending into January 2027," Rystad stated.
"Cumulative supply losses are on track to reach nearly 2 billion barrels by year-end, even under this relatively constructive scenario," the consultancy added.
