WTI crude oil prices dropped below $74 per barrel on Thursday while Brent crude slipped under $77 per barrel, marking their lowest levels since early March. The decline came after the United States and Iran signed an initial agreement aimed at ending a conflict that triggered one of the largest supply disruptions in modern oil market history.
The sharp move lower extends a broader decline in crude prices. Oil has now fallen roughly 38% from the four-month highs reached in April as traders increasingly price in the return of disrupted supplies to global markets.
US-Iran agreement boosts market confidence
President Donald Trump announced that an interim agreement had been signed with Iranian President Masoud Pezeshkian, paving the way for broader negotiations over the next 60 days.
One of the most significant provisions of the 14-point agreement is the immediate reopening of the Strait of Hormuz, one of the world's most important energy shipping routes. The waterway handles a substantial share of global crude oil and liquefied natural gas exports.
The reopening has eased fears that prolonged disruptions could tighten supplies and push prices higher. Investors quickly adjusted expectations as the likelihood of normal shipping operations increased.
At least 10 commercial vessels were reported to be transiting the Strait of Hormuz on Thursday morning, signaling an early recovery in maritime activity after weeks of disruption.
Oil producers could restore halted output
The return of normal traffic through the Strait of Hormuz could allow major oil-producing nations, including Saudi Arabia, the United Arab Emirates, and Iraq, to bring back millions of barrels per day of previously interrupted production.
Shipping data already points to improving conditions. Saudi oil tankers and vessels carrying liquefied natural gas and refined fuels have resumed departures from Gulf export terminals.
For energy markets, the prospect of additional supply arriving in global markets has become a key bearish factor. Traders are increasingly focusing on the potential for higher exports rather than the geopolitical risks that dominated sentiment only weeks ago.
Challenges remain despite falling prices
Despite the optimism surrounding the agreement, uncertainty remains. US Defense Secretary Pete Hegseth warned that Washington is prepared to reimpose what he described as an "ironclad blockade" if Iran fails to comply with the terms of the deal.
The agreement also includes a proposed $300 billion reconstruction initiative for Iran, though major questions surrounding Tehran's nuclear program remain unresolved and are expected to be addressed during the next phase of negotiations.
Meanwhile, crude inventories continue to provide support for oil prices. Stocks at Cushing, Oklahoma, the largest US crude storage hub and the delivery point for WTI futures contracts, have fallen to around 20 million barrels, highlighting relatively tight physical supplies.
For now, traders appear focused on improving shipping activity and the prospect of additional production returning to the market. Whether the US-Iran agreement delivers lasting stability may determine the next major move for both WTI and Brent crude prices.
