Global oil prices extended their decline on Thursday, tumbling more than 2 per cent in early trading after the United States and Iran signed an interim memorandum of understanding to end a three-month war that had triggered the largest energy supply disruption in history. Brent crude futures fell to $77.83 a barrel, while West Texas Intermediate slid below $75, reversing a brief rally the previous day when President Donald Trump had threatened to resume bombing if Tehran’s leaders “don’t behave”. The 14-point accord, signed by Trump and his Iranian counterpart on the sidelines of the G7 summit in Versailles, sets out a 60-day negotiation period during which Iran will permit free passage through the Strait of Hormuz, with full shipping capacity to be restored within 30 days, and Washington will waive sanctions on Iranian oil exports.

Viewed from Washington, the deal marks a sudden diplomatic pivot after more than 100 days of military confrontation that had rattled global energy markets and fuelled a fresh spike in inflation. In Tehran, the agreement offers a pathway out of economic isolation, though Iranian officials have stressed that the memorandum is only a first step. From Gulf capitals and trading floors in London and Singapore, the reopening of Hormuz—the narrow chokepoint through which roughly a fifth of the world’s oil and gas transits—removes a substantial risk premium that had been baked into crude prices. Yet the relief was tempered by signals from the new Federal Reserve chair, who after his first policy meeting acknowledged that “persistently high prices are a burden for the American people”, reinforcing expectations of a US interest rate rise before the end of the year.

Analysts caution that the market’s aggressive sell-off may have raced ahead of reality. While energy traders are pricing in a faster-than-expected return of Iranian barrels, the 60-day negotiation window means sanctions relief and full export resumption are not immediate. Logistical hurdles, insurance normalisation, and the physical reassembly of disrupted supply chains could delay the flow of crude. Moreover, the memorandum’s durability remains untested; the history of US-Iran diplomacy is littered with collapsed frameworks. For now, the panic premium has evaporated, but as one London-based analyst noted, the underlying supply-demand balance remains tight, and any stumble in implementation could swiftly rekindle volatility.