Oil Prices Fall Below $80 as Markets Await U.S.-Iran Deal Details
Global oil prices fell sharply on Tuesday, with Brent crude briefly dropping below $80 per barrel for the first time since early March.
Investors continued to assess the preliminary peace agreement between the United States and Iran. The deal is expected to support the reopening of the Strait of Hormuz, a vital route for global energy shipments.
Brent and WTI Extend Their Decline
By 8:23 a.m. ET, Brent crude futures had fallen 3.7% to $80.13 per barrel. Prices temporarily slipped below $80, returning to levels last seen shortly after the U.S.-Israeli offensive against Iran began in late February.
Meanwhile, U.S. West Texas Intermediate crude futures declined 4.2% to $77.36 per barrel.
Both major benchmarks had already lost nearly 5% on Monday. The sell-off followed the announcement of a preliminary U.S.-Iran agreement that would extend the ceasefire for another 60 days and reopen the Strait of Hormuz.
Peace Agreement Removes Oil Risk Premium
The latest decline erased a large part of the geopolitical risk premium that had accumulated during the Gulf conflict.
Brent and WTI settled at their lowest levels since March as investors reduced expectations of prolonged supply disruptions.
Markets are now focused on when the agreement will take effect and how quickly oil exports can return to normal.
Strait of Hormuz Could Reopen by Friday
President Donald Trump indicated that the Strait of Hormuz could fully reopen by Friday.
Representatives from Washington and Tehran are expected to meet in Switzerland on the same day to formally sign the framework agreement.
Reopening the waterway could allow stranded oil shipments to resume and improve the flow of energy supplies across global markets.
Shipping Risks Remain Despite the Deal
The market reaction has been broadly positive. However, analysts warn that several important risks remain.
Questions persist over maritime security, shipping insurance costs and the speed at which delayed vessels can return to service.
As a result, the recovery of global oil flows may take longer than the initial market reaction suggests.
Oil Inventories Could Begin Recovering
BCA Research analysts said reopening the Strait of Hormuz would increase oil flows and help slow the decline in global inventories.
Improved shipping activity could also allow countries and energy companies to begin rebuilding depleted reserves.
However, BCA Research does not expect oil prices to fall substantially further in the near term.
Geopolitical risks remain present, while global inventories have already declined significantly. Some countries may also increase their strategic reserves to strengthen energy security following the conflict.
Full Market Normalization Could Take Months
Several financial institutions have warned that restoring inventories and normalizing shipping routes could take weeks or even months.
The closure of the Strait of Hormuz caused a significant reduction in available supplies. Therefore, markets may remain sensitive to any delay in implementing the peace agreement.
A breakdown in negotiations or a slower-than-expected reopening could quickly revive supply concerns and increase oil price volatility.
OPEC Cuts Global Oil Demand Forecast
Weaker demand expectations are also weighing on crude prices.
OPEC recently lowered its forecast for global oil demand growth in 2026 for the second consecutive month.
The producer group now expects worldwide demand to increase by approximately 970,000 barrels per day. That figure is below its previous estimate of 1.17 million barrels per day.
The combination of weaker demand growth and the possible restoration of Iranian oil flows has added further pressure to the market.
However, depleted inventories and ongoing geopolitical uncertainty may limit how far oil prices can decline.
