Key facts
- The US and Iran signed an interim agreement to end their war, with President Trump and Masoud Pezeshkian signing the memorandum.
- The deal includes a 60-day window for final negotiations on Iran's nuclear program and the immediate reopening of the Strait of Hormuz.
- US sanctions on Iran are lifted, allowing the country to resume oil sales.
- Oil prices fell sharply, with WTI down 3.07% to $74.43 and Brent down 2.69% to $77.41 a barrel.
- Equity markets showed a mixed reaction, with US futures and Asian markets rising, while European markets were subdued.
Crude oil prices fell further on Thursday after the US and Iran formally signed a memorandum of understanding aimed at ending the war and reopening the Strait of Hormuz. US President Donald Trump and his Iranian counterpart, Masoud Pezeshkian, put their names to an initial accord to halt hostilities, a move expected to restore the flow of crude through the Strait of Hormuz.
At the time of writing, the front-month contract on WTI was down by 2.3% to $75 a barrel, while Brent crude traded 2% lower at around $78 a barrel. Both remain above the roughly $70 level seen before the conflict, but they have fallen well below the peaks of more than $100 reached only weeks ago.
The deal sets a 60-day window for the two sides to negotiate a final settlement on Iran's nuclear program, with Tehran agreeing in the interim to dilute its highly enriched uranium stockpile. Crucially for energy markets, it lifts US-backed sanctions, allowing Iran to resume selling its oil freely, and clears the way for tankers to move crude out of the Persian Gulf.
President Trump stated the Strait of Hormuz will be fully open by Friday and operate without transit charges, a pledge that has encouraged traders to bet on easing supply pressures. The optimism arrives against a strained backdrop, with the International Energy Agency noting that strategic oil reserves across advanced economies had slipped to their lowest level since 1990. The agency also trimmed its outlook for global demand, which it now expects to contract through 2026.
Equities offered a patchier picture following Wednesday's losses on Wall Street, where the S&P 500 fell 1.2% after fresh Fed projections showed nearly half of policymakers expect at least one interest rate hike this year. In his first press conference, Fed chair Kevin Warsh declined to forecast where rates would end the year and signaled a rethink of how the central bank communicates.
US stock futures pointed higher early on Thursday, with contracts on the S&P 500 up 0.9% and on the Nasdaq Composite around 1.4% higher. In Asia, Tokyo's Nikkei 225 and South Korea's Kospi both jumped 2.3%, helped by hopes for an end to the Iran war and strong demand for technology shares. European trading was more subdued, with the Euro Stoxx 50 rising 1% but the broader pan-European Stoxx 600 trading flat.