Oil prices fell again on Thursday as the interim U.S.-Iran peace deal took effect, easing the supply fears that have dominated the market since February. U.S. West Texas Intermediate crude dropped about 1.25% to $75.83 a barrel, while Brent, the international benchmark, fell about 1.4% to $78.41. The declines extend a steep slide that has carried Brent down from above $107 at the height of the conflict to the high $70s.
The catalyst is the reopening of the Strait of Hormuz, the transit point for roughly a fifth of the world’s oil and LNG. Under the agreement, Iran will guarantee free passage for commercial vessels for 60 days, and President Trump has said the strait will be fully open following the signing. The prospect of stranded Gulf barrels returning to the market has removed much of the war-risk premium that propelled crude through the spring.
The International Energy Agency said the market could move into a significant supply surplus by 2027 once the strait reopens and disrupted production resumes, with Executive Director Fatih Birol urging that the waterway be reopened “without conditions.” The IEA’s view aligns with OPEC, which last week cut its own 2026 world oil demand-growth forecast to 970,000 barrels per day, its second straight downward revision. The market’s focus has shifted decisively from scarcity to the speed at which a glut might form.
Some tightness remains in the physical market that could temper the decline. Inventories at Cushing, Oklahoma, the largest U.S. commercial storage hub and the WTI delivery point, have fallen to about 20 million barrels, the lowest level in years. Depleted stockpiles, combined with the time required to clear mines and restore normal tanker traffic through Hormuz, mean the return of supply will be gradual rather than immediate.
The price path from here hinges on execution and on the conflict’s unresolved edges. A smooth reopening would likely push benchmarks lower still, toward levels not seen since before the war; a flare-up on the Lebanon front — where Iran has warned that an Israeli move would violate the deal — could quickly restore a risk premium. For now, the dominant force is the unwinding of the largest oil-supply disruption in decades.
Lower crude is already reaching consumers. AAA’s national average for regular gasoline fell below $4 a gallon for the first time since the war began, and further relief is expected as the crude decline works through the one-to-two-week lag to the pump. The combination of falling prices and an easing of recession fears in energy-importing economies has lifted broader market sentiment.
Continuing coverage: Oil Prices · Geopolitics · Markets.