Oil touches pre-Iran war lows after ceasefire deal
HOUSTON, June 18 (Reuters) – Oil prices fell on Thursday to their lowest level since the start of the Iran war in late February, after an interim agreement to end hostilities, reopen the Strait of Hormuz and ease sanctions on Tehran boosted the global supply outlook.
Brent crude futures were down $1.85, or 2.33%, to $77.69 a barrel at 11:15 a.m. CDT (1615 GMT), while U.S. West Texas Intermediate was down $1.89, or 2.46%, to $74.90 a barrel.
Brent reached its lowest level since February 27, the last trading day before the first US-Israeli attacks on Iran, while WTI hit its lowest level since March 4.
“The potential reopening of the Strait of Hormuz removes the large risk premium placed on crude oil from the disrupted 20% of global oil flows,” Phil Flynn, senior analyst at Price Futures Group, said in a morning note.
“While some have said full normalization – insurance, repairs, sanctions relief – could take weeks, the direction is clear and we have seen that the more pessimistic timeline has proven to be too pessimistic,” Flynn said. he said.
The 14-article memorandum of understanding signed between the USA and Iran starts a 60-day negotiation period in which Iran will allow free passage through the Strait of Hormuz. The agreement calls for traffic in the Bosphorus to be restored to full capacity within 30 days.
The preliminary deal postpones many of the more difficult issues, such as Iran’s nuclear program, and also requires the United States and its partners to come up with a $300 billion plan to finance Iran’s recovery.
While analysts expect a gradual recovery in flows through the Strait of Hormuz, industry experts have warned that prices may not fall as demand recovers and stocks are replenished.
Investment bank Goldman Sachs expects Gulf exports to normalize to pre-war levels by the end of July, while crude production will recover in October.
The bank estimates that normalization of exports to pre-war levels could be achieved by increasing Hormuz flows by 13 million barrels per day from current levels to around 70% of pre-war levels.
BNP Paribas said it does not currently expect a return to pre-war prices, given ongoing supply losses and rising demand, and sees $75 per barrel as a “durable floor for the foreseeable future.” Brent traded around $60 to $70 a barrel in the first two months of the year before the war.
According to a report published by PetroChina’s research unit, China, the world’s second largest oil consumer, is estimated to consume 753 million metric tons in 2026, down 4.9% compared to 2025, due to the shift towards new energy and high oil prices.
