Oil Prices Tumble to Lowest Levels Since US-Iran Conflict Amid US-Iran Agreement
Oil prices experienced a sharp decline on Thursday, June 18, reaching their lowest levels since the onset of the US-Iran conflict. This drop came as an interim agreement between the United States and Iran raised expectations of increased global crude supply.
According to a new Reuters report, Brent crude futures fell by $1.53, or 1.9%, to $78.02 per barrel. Meanwhile, US West Texas Intermediate (WTI) crude dropped by $2.22, or 2.9%, to $74.57 per barrel.
Brent crude touched its lowest point since the first trading session after the initial US-Israeli strikes on Iran, while WTI fell to its weakest level since early March.
The market was driven by expectations of higher Iranian oil exports following the signing of a 14-point memorandum of understanding between Washington and Tehran, aimed at de-escalating tensions.
“The selloff extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent U.S.-Iran memorandum of understanding,” said IG market analyst Tony Sycamore.
The agreement initiates a 60-day negotiation period during which Iran will allow toll-free passage through the Strait of Hormuz, one of the world’s most critical oil and gas shipping routes. The deal also envisions restoring traffic through the waterway to full capacity within 30 days.
Analysts expect a gradual recovery in oil flows through the Strait of Hormuz, although industry experts caution that prices may not collapse significantly, as global demand remains resilient and inventories need replenishment.
Goldman Sachs projects that Gulf oil exports will return to pre-conflict levels by the end of July, with crude production expected to fully recover by October. The investment bank estimates that normalisation could add about 13 million barrels per day in Hormuz flows, restoring volumes to roughly 70% of pre-war levels.
Despite the recent decline, BNP Paribas stated that it does not expect oil prices to return to pre-conflict levels. The bank sees $75 per barrel as a “durable floor for the foreseeable future,” citing persistent supply constraints and firm demand.
