Global oil prices continued their downward trend on Thursday after the United States and Iran formally signed a ceasefire framework agreement that includes the reopening of the Strait of Hormuz, easing concerns over potential supply disruptions in one of the world's most critical energy corridors.
At the start of trading, Brent crude fell 2.40 per cent to $77.64 per barrel, while U.S. West Texas Intermediate (WTI) declined 2.88 per cent to $74.58 per barrel, as traders reacted to expectations of increased oil flows from the Gulf region.
The agreement, signed by leaders of both countries, extends the existing ceasefire for an additional 60 days while negotiators work toward a permanent settlement. The framework reportedly includes provisions for reopening the Strait of Hormuz, easing U.S. sanctions on Iran, releasing certain frozen Iranian assets, and commitments by Tehran regarding its nuclear programme.
The latest decline adds to a broader selloff in crude markets, with oil prices having fallen more than 35 per cent over the past month as geopolitical tensions eased and concerns shifted from supply shortages to the possibility of excess supply.
Despite the agreement, U.S. President Donald Trump warned that Washington could resume military action if Iran fails to comply with the terms of the arrangement.
Analysts remain divided on the sharp fall in prices. Some argue that global oil markets have demonstrated greater resilience to geopolitical disruptions than previously anticipated, drawing comparisons with the market response following Russia's invasion of Ukraine. Others caution that investors may be pricing in a smooth implementation of the agreement too quickly, given the uncertainties that remain around long-term regional stability.
Attention is also turning to the volume of crude expected to return to international markets.
According to estimates from energy intelligence firm Kpler, more than 90 million barrels of non-Iranian crude oil and roughly 70 million barrels of Iranian crude are currently awaiting export from the Gulf region. Market participants believe a sustained reopening of the Strait of Hormuz could accelerate the release of these volumes into global markets.
Signs of improving supply expectations have also emerged in futures markets, with key Middle Eastern crude benchmarks reportedly shifting into contango, a market structure in which future delivery contracts trade at a premium to prompt supplies.
The prospect of additional Iranian exports is expected to be closely monitored in the coming weeks, particularly following indications that sanctions restrictions could be eased under the ceasefire framework.
Adding to bearish sentiment, the International Energy Agency (IEA) recently warned that global oil markets could face a significant surplus in 2027 if production growth continues to outpace demand expansion.
That outlook contrasts with projections from the Organization of the Petroleum Exporting Countries (OPEC), which continues to forecast stronger consumption growth and a more balanced market over the medium term.
While the agreement has significantly reduced immediate geopolitical risks, analysts note that uncertainties remain. Israel has reportedly distanced itself from aspects of the arrangement relating to Lebanon and Hezbollah, highlighting the potential for regional tensions to persist despite the ceasefire.
Market participants are now focused on how quickly shipping activity through the Strait of Hormuz returns to normal levels and whether the agreement evolves into a longer-term settlement capable of sustaining increased oil flows and market stability.