Key facts
- Gulf stock markets declined as oil prices fell towards pre-war levels.
- A preliminary agreement between the US and Iran is expected to lead to the reopening of the Strait of Hormuz.
- Brent crude fell to $72.24 a barrel, with August delivery trading lower than September.
- Vessel traffic in the Strait of Hormuz doubled in the past 24 hours.
- The IMF noted that energy and commodity prices have fallen since the US-Iran agreement.
Most stock markets in the Gulf region closed lower on Thursday, mirroring a decline in oil prices that have returned to levels seen before the start of the US-Israeli war on Iran. The easing of tensions followed a preliminary agreement between the United States and Iran, which is expected to lead to the reopening of the Strait of Hormuz, a critical chokepoint for global oil supply.
Brent crude, the global benchmark, fell to a low of $72.24 a barrel, extending losses as expectations of increased Middle East supply outweighed demand concerns. August Brent crude was trading lower than September delivery, indicating ample short-term supply. Vessel traffic in the Strait of Hormuz doubled over the previous 24 hours to its highest level since late February, according to data from CNN and MarineTraffic.
Analysts noted that news of vessels transiting the strait with their satellite signals switched on contributed to the oil price drop. A combination of strategic inventory releases, reduced demand from China, and tankers leaving the Persian Gulf 'dark' had created a slight oversupply. Fears of a prolonged global energy crunch due to the Iran conflict are diminishing, with oil prices sinking back towards pre-crisis levels. This easing of energy price concerns has alleviated worries about a potential inflationary shock.
In contrast, stock markets in Europe and the US saw gains, with the pan-European Stoxx 600 and the Dow Jones hitting record highs. The UK's petrol prices are expected to fall below 150p a litre in the coming days due to the drop in oil prices. A Liberian-registered oil tanker successfully exited the Strait of Hormuz using a new route promoted by a UN maritime agency.
The interim accord between Iran and the US includes a 60-day negotiation period to address more complex issues, such as Iran's nuclear program. US Energy Secretary Chris Wright stated that oil would continue to flow through the strait even if the deal falters and that Iran would not be able to close it again. Oman has opened temporary routes to facilitate tanker departures, and Qatar's prime minister discussed future management of the strait with regional states. Despite these developments, tensions remain, with Israel launching an airstrike in southern Lebanon.
The International Monetary Fund stated that energy and commodity prices have fallen since the United States and Iran agreed to halt hostilities and reopen the Strait of Hormuz, but warned that Gulf trade flows will take time to return to normal.