Oil prices fell sharply on Friday as the United States and Iran neared an agreement to reopen the Strait of Hormuz, easing the supply fears that have underpinned the market since February. U.S. West Texas Intermediate crude settled down 3.2% at $84.88 a barrel, while Brent, the international benchmark, lost 3.4% to settle at $87.33 — its lowest level since early March.
The session extended a steep weekly decline. Both benchmarks lost about 6% over the week, though they remain up more than 20% since the war began on February 28. Brent fell more than 4% intraday to below $86.50 after President Trump said a peace deal could be signed as early as this weekend in Europe, before paring some losses into the close. On June 11, WTI had settled at $87.71 and Brent at $90.38.
The catalyst was diplomatic. A senior administration official said Washington is 85% confident it will sign an agreement with Tehran, and Iran’s Foreign Minister Araghchi said a memorandum of understanding “has never been closer.” A draft published by Iran’s Mehr News Agency committed Tehran to reopening the strait within 30 days of a final deal, a clause that would bring forward the timeline analysts had penciled in for a return of Gulf flows.
The move lower rippled across markets. Asian equities rallied on the combination of the deal news and falling energy costs, with Japan’s Nikkei 225 surging more than 3% in early-to-mid trading June 12 toward the 66,000-66,500 level. Lower oil feeds directly into easing inflation expectations and improved risk sentiment, a sharp reversal from the risk-off tone that prevailed when crude pushed above $100 at the height of the disruption.
Fitch Ratings has framed the Hormuz closure as a temporary logistical shock, projecting the strait could reopen around the end of July and Brent averaging $87 for full-year 2026 — a level the benchmark has now reached. The agency warned that rapid Middle East capacity recovery, strong non-OPEC supply growth, and a more aggressive OPEC+ policy could recreate an oversupply by the fourth quarter of 2026, pulling prices down further once the strait reopens.
Traders remained cautious despite the improving sentiment. A breakthrough would still face significant obstacles before oil flows fully normalize, including clearing mines from the strait, restarting idled production fields, and repairing damaged energy infrastructure. Reports of drones targeting commercial vessels persisted this week, and with no final text approved by either side, the risk of a last-minute breakdown kept some risk premium in the market even as prices fell.
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