Oil prices fell sharply on Tuesday, with Brent crude dropping below $80 per barrel for the first time since early March, as traders priced in expectations that a US-Iran agreement would restore crude flows through the Strait of Hormuz.
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International benchmark Brent crude declined by about four per cent to $79.8 per barrel as of 1235 GMT, while US benchmark West Texas Intermediate fell by 4.3 per cent to $77.3 per barrel.
Later trading showed deeper losses, with Brent falling as much as 5.5 per cent to $78.58 per barrel, its lowest level since March 3, while WTI dropped 6.3 per cent to $75.66 per barrel.
The decline followed growing confidence that Washington and Tehran would sign an interim agreement to extend their ceasefire and reopen the Strait of Hormuz, a critical oil transit route that has been effectively shut since late February.
The agreement, which followed weeks of negotiations brokered by Qatar and Pakistan, is expected to be signed in Switzerland on Friday.
US President Donald Trump, speaking to reporters on the sidelines of the G7 Summit in France on Tuesday, said he would make the peace deal document public “in a couple of days.”
He added that the waterway would be opened toll-free “permanently.”
The anticipated reopening of the Strait of Hormuz has eased fears of prolonged supply disruption from the Gulf region and increased optimism that regional crude exports will begin to recover.
The waterway is one of the world’s most important oil transit routes, and its disruption had tightened global inventories, unsettled shipping routes and contributed to sharp swings in oil prices.
Market sentiment was also boosted after two Iranian tankers, Hero II and Diona, reportedly sailed out of the Gulf of Oman and crossed the nominal US blockade line on Tuesday, marking the first sign of Iranian oil movement without military obstruction since restrictions began.
Neither tanker was signalling its final destination, but both appeared to be heading south-east around India.
Middle Eastern crude grades also weakened after the peace deal was announced.
Abu Dhabi’s Murban crude fell as low as $72.74 per barrel on Tuesday, only 49 cents above its level before the conflict began, after rising as high as $160.50 in March. Dubai and Oman crude prices also declined during the week.
Oil prices had surged after the US and Israel launched attacks on Iran on February 28, pushing Brent from about $72 per barrel before the conflict to as high as $126 per barrel in April.
Repeated failed hopes of a peace agreement had caused severe volatility in the market in recent weeks.
Despite the latest price decline, analysts warned that uncertainty remains over how quickly the agreement will be implemented and whether full shipping activity through the strait can resume immediately.
Oil traders said it could take up to three months for ship traffic through the strategic chokepoint to return to pre-war levels.
Analysts at UBS said markets had welcomed the development but would need clearer evidence that shipping companies and insurers were confident enough to resume movement through the waterway, especially given concerns about possible sea mines and security risks.
“Markets clearly welcome the latest development, although how quickly traffic through the strait can normalise remains to be seen,” UBS analysts said.
Goldman Sachs also trimmed its oil price forecast after the US-Iran deal, saying it now expects Brent to trade at $80 per barrel in the final quarter of 2026, $10 below its previous projection.
The bank said it now assumes Persian Gulf exports will return to pre-war levels by the end of July, instead of the end of August as earlier expected.
Morgan Stanley and Citi also lowered their oil price forecasts after news of the preliminary agreement.
However, doubts remain around the interim deal, including questions over shipping security, operating conditions and whether the Strait of Hormuz will reopen fully.
In the United States, emergency crude reserves have fallen to their lowest level since 1983, underscoring the pressure on available supply after recent drawdowns from the Strategic Petroleum Reserve.
The latest fall in crude prices signals traders’ expectation that the reopening of the Strait of Hormuz could ease pressure on global supply chains, restore regional exports and reduce the war-risk premium that had pushed oil prices higher in recent months.
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