Global oil prices crashed in early Monday trading after the United States and Iran reached a breakthrough agreement aimed at reopening the Strait of Hormuz, easing fears of prolonged supply disruptions in one of the world's most critical oil transit routes.
As at the time of writing 05:03 a.m. (WAT), Brent crude had fallen 3.90% to $83.92 per barrel, while US West Texas Intermediate (WTI) crude dropped 4.70% to $80.89 per barrel, extending a sharp sell-off that began after news of the agreement emerged.
The market reaction followed an announcement by US President Donald Trump, who said the deal with Iran had been concluded and that oil shipments through the Strait of Hormuz would resume once the agreement is formally signed.
Taking to social media, Trump declared that “oil will flow” through the strategic waterway after the deal is signed.
Iranian Deputy Foreign Minister Kazem Gharibabadi also confirmed that negotiators had finalised the text of a memorandum of understanding, with a formal signing ceremony expected to take place in Switzerland later this week. Pakistan and Qatar, which played key mediation roles throughout the negotiations, separately confirmed the agreement.
The development marks a dramatic shift for oil markets that have spent months pricing in geopolitical risks following military confrontations involving the United States, Iran and Israel. Concerns over a possible closure of the Strait of Hormuz had pushed crude prices sharply higher in recent weeks, with traders fearing disruptions to nearly a fifth of global oil supplies that pass through the channel.
Market sentiment has now reversed as investors increasingly bet on the restoration of normal shipping operations and the return of Iranian crude exports to international markets during the proposed 60-day ceasefire period.
Reports from Iranian media suggest the emerging framework could include sanctions relief on Iranian oil exports, the release of frozen Iranian assets and commitments surrounding Tehran's nuclear programme, although neither Washington nor Tehran has officially disclosed the full details of the agreement.
Despite the sharp decline in prices, analysts caution that volatility could persist until the deal is formally signed, maritime security concerns are resolved and commercial shipping fully resumes through the Strait of Hormuz.
For now, however, traders appear to be pricing in the strongest prospect for regional de-escalation since the conflict began, triggering one of the steepest single-day declines in oil prices this year.