Oil prices fell sharply in early trading after President Donald Trump and Iranian President Masoud Pezeshkian signed an initial accord to halt hostilities. The agreement is expected to restore crude flows through the Strait of Hormuz, a critical global shipping artery.
WTI crude dropped 2.3% to $75 a barrel, while Brent crude fell 2% to approximately $78. Both benchmarks remain above pre-conflict levels but have retreated significantly from recent peaks exceeding $100.
The deal establishes a 60-day negotiation window for a final nuclear settlement. Tehran agreed to dilute its enriched uranium stockpile in the interim. Crucially, the accord lifts US sanctions, allowing Iran to resume oil exports and clearing tankers to transit the Persian Gulf. President Trump pledged the strait would be fully open and free of transit charges by Friday.
Despite this optimism, energy markets face structural headwinds. The International Energy Agency reported that strategic oil reserves in advanced economies have fallen to their lowest level since 1990. OECD government stockpiles have declined by 163 million barrels since the conflict began.
The IEA also trimmed its global demand outlook, forecasting contraction through 2026 due to elevated fuel prices. The agency cautioned that supply recovery may be gradual due to mine clearance and lingering shipping disruptions, even with the interim deal in place.
Equities presented a mixed picture following Federal Reserve projections indicating potential interest rate hikes. New Fed Chair Kevin Warsh signaled a shift in central bank communication, declining to provide specific rate forecasts.
President Trump expressed indifference to the hawkish Fed stance while attending the G7 summit in France. He stated he is guided by Chair Warsh’s preferences, marking a departure from his previous pressure for rate cuts.
Global markets responded positively to the geopolitical de-escalation. US stock futures pointed higher, while Asian indices surged on technology demand and peace hopes. European bourses saw modest gains, led by France's CAC 40.