Oil Prices Drop to Lowest Level Since US-Iran Conflict as Supply Outlook Improves

Global crude oil prices recorded a sharp decline on Thursday, falling to their lowest levels since the onset of the US-Iran conflict, as easing geopolitical tensions raised expectations of improved supply flows in the global energy market.

The downturn followed renewed optimism after an interim agreement between the United States and Iran, which is seen as a step toward de-escalating tensions and gradually restoring oil exports from the Middle East.

According to Reuters, Brent crude futures fell by $1.53, or 1.9%, to $78.02 per barrel as of 1326 GMT, while US West Texas Intermediate (WTI) dropped $2.22, or 2.9%, to $74.57 per barrel. Both benchmarks hit their weakest levels since the early stages of the conflict, reflecting shifting market sentiment.

Brent crude briefly touched its lowest point since the first trading session following initial US-Israeli strikes on Iran, while WTI slipped to its lowest level since early March, underscoring the scale of the recent selloff.

Market analysts say the decline has been largely driven by expectations that Iranian crude will gradually return to global markets following the signing of a 14-point memorandum of understanding between Washington and Tehran. The agreement is designed to reduce tensions and improve maritime stability, particularly in the Strait of Hormuz, one of the world’s most important oil transit routes.

Energy market analyst Tony Sycamore of IG noted that the selloff reflects growing confidence that Iranian oil exports could resume sooner than previously anticipated. He explained that traders are rapidly adjusting positions in anticipation of increased supply entering the market.

Under the terms of the agreement, a 60-day negotiation period has been initiated, during which Iran is expected to allow toll-free passage through the Strait of Hormuz. The arrangement also outlines plans to restore full shipping capacity through the waterway within 30 days, a move that could significantly improve global oil logistics.

Despite the recent price drop, analysts caution that the market may not see a sustained collapse in crude prices. Strong global demand and the need to rebuild inventories continue to provide underlying support for oil.

Investment bank Goldman Sachs projects that oil exports from the Gulf region could return to pre-conflict levels by the end of July, with full production recovery expected by October. The bank estimates that normalization could add as much as 13 million barrels per day in flows through the Strait of Hormuz, restoring volumes to around 70% of pre-war levels.

Meanwhile, BNP Paribas maintains a more cautious outlook, stating that oil prices are unlikely to return to pre-conflict lows in the near term. The bank believes that around $75 per barrel may act as a stable price floor due to ongoing supply constraints and steady global demand.

As geopolitical risks begin to ease and supply expectations shift, energy markets remain highly sensitive to developments in US-Iran relations, with traders closely watching whether diplomatic progress will translate into sustained increases in global oil supply.