Oil prices trail on Iran peace deal optimism

Oil prices have fallen below the $100/bbl threshold as traders priced in the prospect of a US-Iran peace deal that could pave the way for the reopening of the Strait of Hormuz.

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Brent crude’s price has moved lower after US President Donald Trump wrote on social media platform Truth Social that negotiations with Tehran are proceeding in an “orderly and constructive manner.”

The proposed agreement is expected to reopen the Strait of Hormuz, bring the Middle East conflict to an end and secure Iranian concessions on its enriched uranium stockpile.

The initial phase of the deal involves a 60-day ceasefire extension, allowing vessel movement to resume through the Strait of Hormuz, while nuclear negotiations continue, the BBC reported.

“The oil market is trading lower at the start of the week, with signs of a deal between the US and Iran increasing,” ING Bank’s head of commodities strategy Warren Patterson said.

Meanwhile, the spokesperson for the Iranian Ministry of Foreign Affairs Esmail Baghaei told reporters that while the deal was in its final stages, the details of the uranium enrichment issue are not being discussed at the moment. 

Trump also said on Truth Social that he had informed his representatives “not to rush into a deal,” adding that the US blockade of the strait will remain in place until a final agreement between the two nations is reached.

While a deal will offer some relief to the oil market, questions remain over how quickly flows through the Persian Gulf are to recover to pre-war levels, and how long damaged oil and gas infrastructure will take to restart, according to market analysts.

“We've been at this stage before, only for talks to break down. Therefore, the market will likely be more cautious about overreacting to these headlines,” Patterson said.

A ceasefire alone may not be enough, as the absence of firm guarantees on future vessel traffic via the strait will leave markets exposed to renewed geopolitical disruption.

By Aparupa Mazumder

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