After repeatedly surging above $100 a barrel amid the Middle East conflict, oil prices have finally begun to decline, moving closer to the $75 level seen before the conflict. This week, crude oil prices fell below $80 for the first time since early March as expectations of a potential US-Iran deal boosted sentiment. Around 7am IST, West Texas Intermediate (WTI) crude was trading at $76.46 per barrel, while Brent crude was at $79.41 per barrel. Before the US-Iran conflict, crude oil prices were near $70 per barrel.Since the peace deal was announced, both benchmarks had fallen about 5%, hitting three-month lows, amid hopes that the US-Iran deal could pave the way for the resumption of oil flows through the Strait of Hormuz.“Oil markets retreated on expectations that the Strait of Hormuz will reopen after the peace deal, but traders held off further selling pending details,” Hiroyuki Kikukawa, chief strategist at Nissan Securities Investments, told Reuters. Kikukawa said WTI crude is likely to remain volatile, fluctuating between above $10 a barrel and below $80 a barrel.US President Donald Trump said the deal would prevent Tehran from acquiring nuclear weapons, while a US official said the deal would allow Iran to resume oil sales once it is signed. The memorandum of understanding, which has not yet been made public, extends the fragile ceasefire first announced in April for another 60 days, allowing time for talks aimed at achieving a permanent cease-fire.Under the proposed arrangement, the United States would lift its blockade of Iran’s ports, while Tehran would allow oil tanker traffic through the Strait of Hormuz, which has been effectively blocked since the US and Israeli attacks on February 28.However, industry officials warn that it could take weeks, months or even years to restore production and refining activity to pre-war levels. At the same time, uncertainty remained over the durability of the ceasefire as Israel distanced itself from both the April ceasefire and the latest US-Iran agreement.Meanwhile, US intelligence agencies have cautioned that Iran now has the ability to effectively close the Strait of Hormuz whenever it wants, according to a CNN report citing sources familiar with the assessment.“We have now handed Iran de facto control over the strait – a weapon more powerful than any nuke,” a source familiar with the US intelligence assessment was quoted by CNN as saying.Intelligence findings show that Iran’s actions during the recent conflict have demonstrated both the intent and the ability to shut down the strategically important waterway through which 20% of the world’s oil and liquefied natural gas exports move.
