- Strait of Hormuz reopened, US-Iran deal lowered oil prices.
- Tankers resumed passage, easing global oil supply concerns.
- Kuwait, Iraq plan production increases, further boosting supply.
The reopening of the Strait of Hormuz following a peace agreement between the United States and Iran has injected fresh optimism into global oil markets, sending crude prices lower on Friday. However, traders remain wary about whether the breakthrough will translate into a lasting return to normalcy for one of the world’s most critical energy corridors.
The decline in oil prices comes after weeks of heightened volatility driven by conflict in West Asia, which disrupted shipping routes, fuelled supply concerns and pushed energy markets into risk-off mode.
Crude Prices Extend Decline
Brent crude futures fell 43 cents, or 0.54 per cent, to $79.42 a barrel by 0328 GMT, while US West Texas Intermediate (WTI) crude slipped 17 cents, or 0.22 per cent, to $76.43 a barrel.
The more actively traded August WTI contract was also lower, falling 30 cents to $75.55 per barrel.
The weakness follows Thursday’s sharp decline, when both benchmarks touched their lowest levels since early March as signs emerged that oil shipments through the Strait of Hormuz were beginning to resume.
Hormuz Reopens, Tankers Return
A major trigger for the sell-off was the movement of several oil tankers through the Strait of Hormuz just hours after the presidents of Iran and the United States signed an interim agreement aimed at ending the conflict.
Among the vessels reported to have passed through the waterway were three Saudi-flagged tankers carrying a combined six million barrels of crude oil.
The Strait of Hormuz remains one of the world’s most strategically important maritime routes. Prior to the conflict, roughly one-fifth of global oil and liquefied natural gas trade passed through the narrow channel.
With shipping activity gradually resuming, analysts believe global supply concerns could ease significantly if the agreement holds.
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Millions of Barrels Could Return to Markets
Market participants are closely watching the potential supply impact of the agreement.
Analysts estimate that more than 85 million barrels of oil currently stranded across the Gulf region could eventually return to international markets. The deal also includes the removal of US sanctions on Iranian oil exports, a move expected to further increase available supply.
The prospect of additional barrels entering the market has strengthened expectations of a better-balanced global oil market in the coming months.
Traders Want Proof Before Calling the All-Clear
Despite the initial optimism, market participants are not yet ready to declare the crisis over.
The cautious approach reflects lingering concerns over whether shipping activity can return fully to pre-conflict levels.
Oil producers across the region have begun signalling a return to business as usual.
Kuwait Petroleum Corporation announced that it had lifted all force majeure notices issued during the conflict with immediate effect.
Meanwhile, Iraq’s Oil Minister Basim Mohammed said the country’s oilfields are prepared to restore production gradually and return output to previous levels.
These developments have reinforced expectations that supply disruptions could ease if regional stability improves.
Geopolitical Risks Have Not Disappeared
While the US-Iran agreement has provided relief to energy markets, uncertainty remains.
Israel has continued military operations against Hezbollah in Lebanon, raising questions about the broader stability of the region and the durability of the peace arrangement.
Markets were also unsettled after US Vice President JD Vance withdrew from a planned meeting with Iranian negotiators in Switzerland on Friday.
For some analysts, these developments highlight the fragility of the current situation.
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What It Means for Oil Markets
For now, the reopening of the Strait of Hormuz and the prospect of additional oil supplies are helping cool prices after months of conflict-driven gains.
However, the direction of crude markets will likely depend on whether tanker movements continue uninterrupted and whether the US-Iran agreement evolves into a more durable peace framework.
With global energy markets still sensitive to geopolitical developments, traders appear reluctant to fully price in a return to normal conditions until there is clearer evidence that supply routes and diplomatic ties have stabilised.
