Oil Prices Continue to Fall Amid Hopes for Peace and Strait Access

Oil Prices Fall to Lowest Level Since March as Iran War Nears End

The price of Brent crude oil has dropped to its lowest level since early March, reaching $78.24 per barrel as of 08:00 GMT on Wednesday. This decline follows a nearly 5% drop over the past two days and extends the current trend of falling prices.

The international benchmark had previously risen by more than 50% during the conflict in Iran, which began on February 28. However, oil futures for delivery in August have fallen significantly since then, with the price now only about 7% higher than before the US and Israel launched attacks on Iran.

Analysts predict that the signing of a framework agreement to end the war will bring relief to markets. Tamas Varga, an analyst at PVM Oil Associates, stated that the immediate prognosis is optimistic and assumes no significant setbacks. Vandana Hari, founder of Vanda Insights, noted that while the announcement has brought some relief, the “hardest part” of delivering on the pledges and promises remains to be seen.

The agreement is expected to involve Iran ending its near-total closure of the Strait of Hormuz in exchange for the US lifting its blockade of Iranian ports. The full reopening of the strait would be a crucial step towards restoring confidence in energy supply chains, which have been disrupted by nearly four months of turmoil.

Maritime traffic in the strait has been reduced due to the threat of Iranian missiles, drones, and mines, resulting in an estimated 14 million barrels of lost global oil supply each day. Even if the war ends, it is expected that global energy flows will take months to fully recover, with over 500 vessels waiting to exit the Gulf through the strait.

The signing ceremony scheduled for Friday in Geneva, Switzerland, marks the beginning of a process of normalisation, according to Stephen Cotton, general-secretary of the International Transport Workers’ Federation. However, he noted that a realistic return to normal shipping patterns is weeks or months away due to the backlog of stranded vessels and need for crew changes and rest.

Source: Al Jazeera