Global oil prices fell sharply on Monday after the United States and Iran announced an agreement aimed at restoring shipping through the Strait of Hormuz, a critical route for global energy supplies that has remained closed for more than three months.
Early trading in Asia saw benchmark crude prices decline as traders reacted to expectations that oil exports from the Gulf region could soon return to normal levels. Brent crude dropped to around $84 per barrel, while U.S. benchmark West Texas Intermediate (WTI) traded near $81 per barrel.
The latest decline extends a downward trend that has developed in recent weeks as speculation grew that diplomatic efforts were making progress despite ongoing tensions in the region.
U.S. President Donald Trump said a deal had been reached and indicated that maritime traffic through the strategic waterway would resume once the agreement is formally signed later this week. Iranian officials also confirmed that negotiators had finalized the text of a memorandum of understanding, with a signing ceremony expected to take place in Switzerland on Friday.
The breakthrough was supported by mediation efforts led by Pakistan and Qatar, both of which publicly acknowledged the agreement.
Although full details have not yet been officially released, reports from Iranian media suggest the arrangement could include sanctions relief for Iran’s oil sector, the release of billions of dollars in frozen Iranian assets, and commitments related to Iran’s nuclear programme.
The proposed framework would also allow Iran to restart crude exports during a 60-day ceasefire period while broader negotiations continue.
The agreement emerged after months of conflict and uncertainty that disrupted regional stability and raised concerns about global energy supplies. However, analysts caution that several hurdles remain before markets can fully relax.
Shipping channels through the Strait of Hormuz must still be secured and cleared before normal operations can resume, while the deal itself awaits formal signing.
Tensions also flared shortly before the announcement when an Israeli airstrike targeted southern Beirut. Trump criticized the attack and called on all parties involved in the conflict to avoid further military actions.
Despite lingering risks, investors appear encouraged by the prospect of reduced geopolitical tensions and the gradual return of oil flows through one of the world’s most important energy corridors.
Market participants will continue to monitor developments closely as the region moves toward implementing the agreement and restoring normal shipping operations.
