Crude oil prices crashed more than 4% on Monday after the United States and Iran announced they had reached a peace agreement to end the war and reopen the Strait of Hormuz.
Brent crude oil price plunged 3.95% to $83.88 a barrel, while the US West Texas Intermediate (WTI) crude declined 4.68% to $80.91. Both contracts tumbled more than 3% on Friday.
The will sign a memorandum of understanding in Switzerland on Friday, said the prime minister of Pakistan, whose country has served as a mediator.
“The Deal with the Islamic Republic of Iran is now complete,” US President Donald Trump said on Sunday.
Trump also announced that the strategic Strait of Hormuz – a vital maritime chokepoint through which roughly 20% of the world’s supply transits – would reopen.
“I hereby fully authorize the toll free opening of the , and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!”
Meanwhile, Iran said that the newly announced agreement with the United States put an “immediate end” to the countries’ war.
Taking to Twitter, Shehbaz Sherif, the Prime Minister of Pakistan, said, “Following intensive talks, we are pleased to announce that the Peace Deal between the United States of America and Islamic Republic of Iran has been REACHED. Both sides have declared the immediate and permanent termination of military operations on all fronts, including in Lebanon.”
He added that the official signing ceremony will be on Friday, 19 June in Switzerland.
“With the agreement now in place, mediators will facilitate a series of meetings this week. These pre-implementation discussions will lay the foundation for the technical talks and the official signing ceremony,” he said.
Experts are of the view that supplies through the maritime chokepoint may somewhat ease, but with refining facilities and gas fields hit during the over three-month-long war, restoring production and supplies to pre-war levels may take considerable time.
“There will be an immediate impact on prices. However, as 10-12 million barrels per day of oil production is out of the supply chain, the shut facilities may not immediately restart. Some facilities have also been damaged, which will prolong normalization. For oil prices to reach the pre-war levels of around $70 per barrel, it would take considerable time,” said Prashant Vashisht, senior vice president and co-group head, corporate ratings, ICRA Ltd.