Oil slides on Hormuz deal as brent closes in on losing war gain

Oil fell as an interim US-Iran peace deal went into effect, putting the focus on how quickly transits through the Strait of Hormuz can be ramped up as Persian Gulf producers try to restart shut-in fields.

Brent sank below $78 a barrel, while West Texas Intermediate was near $75. President Donald Trump said he had signed the deal, which envisions a rapid reopening of the critical waterway. US oil sanctions must now be lifted immediately, Iranian Foreign Ministry spokesman Esmail Baghaei said.

With traders looking for early signs of a revival in energy shipments, a laden liquefied natural gas carrier and an empty products tanker were crossing the strait, ship-tracking data showed. Still, traffic through the conduit was otherwise light, with only smaller cargo vessels passing through.

Brent has collapsed by about 11% so far this week, putting it on track for a second, straight weekly loss. With the fresh drop on Thursday, futures are only a little more than $5 above the price before the war broke out. In April, the global benchmark had topped $126, the highest level since 2022.

Crude has been dragged lower by the push to end the conflict, which erupted in February when the US and Israel attacked Iran to curb its nuclear program. Tehran responded by blocking the waterway, which used to carry about a fifth of global oil supply in peacetime. The US also subsequently blockaded the conduit in a bid to ramp up the pressure against the Islamic Republic.

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“The easy part was reaching an agreement — the harder part is determining how much of the disruption from the past few months becomes permanent,” said Haris Khurshid, chief investment officer of Karobaar Capital LP.

Goldman Sachs Group Inc. said Persian Gulf exports are now expected to “normalize” by the end of next month, compared with the end of August previously. Still, flows may recover to only 70% of pre-war levels, the bank’s analysts said in a note, highlighting producers tapping alternative routes.

“Markets tend to assume a reopening means a reset,” said Khurshid. “While really some of the changes made during the disruption may stick around longer than people expect.”

Prices:

Brent for August settlement traded 2.1% lower at $77.85 a barrel at 1:52 p.m. in Singapore.

Earlier, prices hit $77.52 a barrel, the lowest since March 2.

WTI for July delivery shed 2.5% to $74.85 a barrel.

While oil prices have eased, pressure on inventories remains acute. Stockpiles at Cushing, the largest US commercial storage hub, have sunk to about 20 million barrels. That’s a level traders consider an operational minimum.

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At the same time, petroleum products have followed crude’s path lower. Average nationwide gasoline prices in the US have dropped back to $4.025 a gallon, compared with a high of $4.564 last month, according to daily figures from the American Automobile Association.

On Wednesday, President Trump signaled that the risk of a major economic crisis had played a key role in his decision to call off the war. Military escalation “could have caused an international depression,” he said.

The US leader “really does want, going into the midterms, lower gasoline prices,” said Carolyn Kissane, associate dean at the Center for Global Affairs at New York University, referring to the elections in November. “He’s willing to accept a deal kind of at all costs.”

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