Crude oil prices in the global market today witnessed a sharp decline due to the end of long-standing tensions between US and Iranian officials and strong hopes of a possible peace deal. Brent crude prices fell below the psychological level of $100 for the first time in weeks on expectations of global supply recovery at the start of the trading week.
During this morning’s session, global benchmark Brent crude futures recorded a huge decline of $4.71, or about 5.1%, to $98.83 per barrel. Similarly, the price of US West Texas Intermediate (WTI) also closed at $92.03 per barrel, with a significant decline of $4.57 (5.2%). This is the lowest level of oil prices since the beginning of May, which has completely reduced the market pressure caused by the war that began in late February.
The main reason for this sudden drop in oil prices is the recent statement by US Secretary of State Marco Rubio in New Delhi, in which he said to reporters that an agreement to end the war between the two countries could come out at any time or today. He described this peace formula as “quite solid” and said that this agreement also has strong support from the Gulf countries. The possible agreement includes an extension of a 60-day ceasefire between the parties, the restoration of some of Iran’s frozen assets, and the reopening of the world’s most important sea passage,, the Strait of Hormuz, for commercial transport.
It should be noted that the dispute that has been going on for the past three months has led to the blockade of the Strait of Hormuz, through which 20 percent of the world’s daily oil and LNG supplies pass. The hope of opening this vital route is expected to bring great relief to Asian economies, especially countries like Japan.
However, market experts are still somewhat cautious because US President Donald Trump, in a statement on social media yesterday, had warned negotiators against any haste and made it clear that the US blockade will remain in place until the final agreement is formally implemented.
On the other hand, Iranian state media has also confirmed that a final agreement on some key provisions is still to be reached. Energy analysts believe that even if the agreement is reached today, it may take a few months for the affected shipping lanes and suspended oil infrastructure in the Gulf to fully restore their old capacity.
Read also:Crude oil price slashes slightly in global market as investors optimistic for peace
