Oil Prices Correction Extends as US-Iran Sign Interim Deal
Oil prices extended their decline on Thursday after the US and Iran signed an interim agreement to end hostilities and pave the way for the reopening of the Strait of Hormuz, easing concerns over supply disruptions through the world’s most critical oil transit route.
The international benchmark Brent crude traded at $78.31 per barrel, down about 1.5% from the previous close of $79.55. US benchmark West Texas Intermediate (WTI) fell 1.1% to $75.21 per barrel, compared with $76.02 in the previous session.
Brent prices had climbed as high as $82.97 on Wednesday after US President Donald Trump warned that military action against Iran remained possible if Tehran failed to comply with the terms of the agreement.
The decline followed confirmation that Washington and Tehran had electronically signed the “Islamabad memorandum,” a Pakistan-brokered framework aimed at ending the conflict and restoring maritime traffic through the Strait of Hormuz.
In a statement posted on X, Pakistani Prime Minister Shehbaz Sharif said the agreement had been signed by the presidents of both countries and would take effect immediately.
Under the memorandum, Iran is expected to reopen the Strait while the US will lift its naval blockade. Sharif also said a formal ceremony is scheduled to take place in Switzerland on June 19 with the support of co-mediator Qatar.
The agreement follows a 14-point memorandum reached on June 14 that commits both sides to ending the conflict and pursuing diplomatic solutions. According to international media reports, the framework includes provisions related to the reopening of the Strait of Hormuz, the removal of the US naval blockade, and efforts to end hostilities across the region, including in Lebanon.
Negotiations on Iran’s nuclear program and sanctions relief are expected to continue as part of efforts to reach a comprehensive settlement.
The agreement comes after weeks of disruptions caused by the US-Israel-Iran conflict, which triggered what many analysts described as the largest oil supply shock in modern history. The prospect of Iranian and broader Gulf oil supplies returning to global markets has significantly improved expectations for future supply availability.
The International Energy Agency (IEA) said in its latest oil market report that global oil supply is expected to rebound sharply next year as Gulf production recovers.
The agency projects supply will rise by around 8 million barrels per day(bpd) in 2027 to 110.35 million bpd, while global demand is forecast to increase by about 2 million bpd to 105.3 million bpd, implying a potential surplus of roughly 5 million bpd.
Moreover, according to the Energy Information Administration (EIA), US crude oil production increased by 7,000 bpd to 13.81 million bpd in the week ended June 12, adding to downward pressure on prices.
However, a sharp decline in US commercial crude inventories helped limit losses, with stockpiles falling by 8.3 million barrels to 418.2 million barrels, about 6% below the five-year seasonal average.
The US Federal Reserve (Fed) kept its benchmark interest rate unchanged at 3.5%-3.75%, in line with market expectations.
The Fed also raised its year-end federal funds rate projection to 3.8% from 3.4% estimated in March. The central bank increased its 2027 rate forecast to 3.6% from 3.1% and its 2028 projection to 3.4% from 3.1%, while leaving its longer-run rate estimate unchanged at 3.1%.
The revised projections signalled that policymakers now see the possibility of interest rate increases in 2026, raising concerns that tighter monetary conditions could slow economic growth and weaken oil demand, adding further pressure on prices. Oil Prices Tumble by 5% as Iran Opens Strait of Hormuz
