Oil prices fell in early Asian trading on Monday after Pakistan said the United States and Iran had reached an agreement that could lead to the reopening of the Strait of Hormuz, easing fears of a prolonged disruption to global energy supplies.
Brent crude, the international benchmark, dropped about 4% to $83.81 a barrel, while West Texas Intermediate fell 4.7% to $80.89 as traders responded to signs that tensions in the Gulf may be starting to ease.
The announcement followed weeks of pressure on energy markets, with investors closely watching whether the conflict would continue to block one of the world’s most important shipping corridors. The Strait of Hormuz connects the Gulf with the Arabian Sea and is a vital route for oil and liquefied natural gas, particularly for import-reliant economies in Asia.
Pakistan’s prime minister, Shehbaz Sharif, said the agreement was expected to be formally signed in Switzerland on Friday, 19 June. Islamabad has been involved in diplomatic efforts to end the conflict between Washington and Tehran.
Iran’s Deputy Foreign Minister Kazem Gharibabadi also said on state television that an agreement with the U.S. had been finalised. President Donald Trump welcomed the development on social media, writing, “let the oil flow!”
Despite the sharp fall in crude prices, analysts warned that the market may remain unsettled until more details of the agreement are made public. Vandana Hari, of Vanda Insights, said the lack of clarity around the deal “is likely to inject unease and uncertainty into the market.”
The waterway had been largely closed since shortly after U.S. and Israeli strikes on Iran began on 28 February. Tehran had previously threatened vessels travelling through the strait, raising fears that the conflict could further disrupt global trade and energy supplies.
Brent had been trading near $70 a barrel before the war, but climbed to about $120 at the height of the crisis. Experts have cautioned that shipments may not return to normal immediately, as mines may need to be cleared, tanker backlogs addressed, and loading operations restarted.
Asian stock markets rose on the news, with Japan’s Nikkei 225 up 3.6% and South Korea’s Kospi gaining more than 5%.