Oil Prices Plunge After Trump Announces US-Iran Deal

Global oil prices experienced a significant decline during trading on Sunday (14/6) local time, following US President Donald Trump’s announcement of a preliminary agreement with Iran that includes ending the US naval blockade against the country. Based on market data, Brent crude oil prices fell 3.9% to around US$84 per barrel, while US crude oil (WTI) plunged 4.8% to US$81 per barrel. If these prices hold, this would be the lowest level since early March, just days after the armed conflict began. Through a social media post on Sunday afternoon, Trump stated that the deal with Iran was now complete. Iranian officials also confirmed on Sunday evening that a Memorandum of Agreement (MoA) had been finalised and was scheduled to be formally signed on Friday in Switzerland. A crucial point in the agreement is the reopening of the Strait of Hormuz. Trump stated he had authorised the opening of this vital shipping lane free of charge. Previously, some ships reportedly had to pay an average of US$2 million to transit the strait during the period of tension. Although the market welcomed the news with a rise in stock index futures (Dow Futures up 0.6%), analysts warned that a total recovery will take time. Oil wells in the Middle East that were shut during the war require weeks to return to maximum operation. Bob McNally, President of Rapidan Energy, expressed concern that oil prices could surge again if the recovery process is hampered. ‘I am very worried we could see oil prices skyrocket back to the US$100 per barrel range by late summer if strategic reserves run low,’ he said in an interview with ABC. In the United States, the average petrol price stood at US$4.07 per gallon according to AAA data. Although it has declined for three consecutive weeks, the price is still about 36.6% higher than the period before the conflict broke out in late February. Market participants are now waiting for tangible evidence of tankers safely transiting the Strait of Hormuz before fully believing that the global energy crisis has completely subsided.