Key facts
- A preliminary U.S.-Iran deal has been signed to end the Gulf war and reopen the Strait of Hormuz.
- President Trump announced the deal and stated the Strait of Hormuz could reopen Friday.
- Oil prices fell to a three-month low, with Brent crude below $80 a barrel.
- Major financial institutions have lowered their oil price forecasts for 2026 and 2027.
- The interim deal extends a ceasefire for 60 days and aims to reopen the Strait of Hormuz, through which about 20% of global oil supplies pass.
Oil prices experienced a significant decline, with Brent crude futures falling 5.1% to $78.92 a barrel and U.S. West Texas Intermediate (WTI) crude down 5.9% to $75.95, marking a three-month low. This drop was triggered by a preliminary U.S.-Iran agreement aimed at ending the Gulf war and reopening the Strait of Hormuz, a critical chokepoint for global oil supplies.
President Donald Trump announced the interim deal, stating that the Strait of Hormuz could reopen as early as Friday. The agreement reportedly extends a 60-day ceasefire and allows Iran to begin selling oil and fuel. However, doubts persist regarding the deal's details, including financial compensation, sanctions, and a satisfactory nuclear agreement, leading experts to warn that full recovery of shipping and energy exports could take weeks.
Following the news, major investment banks such as Goldman Sachs, Morgan Stanley, and Citi have significantly lowered their oil price forecasts for late 2026 and 2027. Middle Eastern crude markets have weakened amid optimism about increased oil flows. Analysts at Ritterbusch and Associates noted that the market is applying a vote of confidence to the plan with limited regard for contentious issues.
Other factors contributing to the downward pressure on oil prices include concerns about China's economic performance, rising global inflation and interest rates, and ongoing calls for peace between Russia and Ukraine. The Bank of Japan's decision to raise interest rates to a 31-year high also adds to concerns about reduced global economic growth and oil demand.
In terms of U.S. oil inventories, analysts anticipate a withdrawal of 4.5 million barrels for the week ended June 12, which would mark the first time energy firms have pulled crude from storage for eight consecutive weeks since January 2025.