Global oil prices tumbled on Thursday to levels not seen since the opening days of the four-month war between the United States and Iran, after Washington and Tehran signed a provisional agreement to end hostilities and reopen the Strait of Hormuz. Brent crude, the international benchmark, slid more than 1.5 percent to trade near $78 a barrel, while the US West Texas Intermediate contract dropped by over 2 percent to around $75. Both markers touched their lowest points since early March, effectively erasing the entire war premium that had been built into energy markets since the initial US-Israeli strikes on Iran. The sell-off accelerated as satellite tracking confirmed that tankers carrying roughly 10 million barrels of previously stranded oil had begun moving through the strait, a maritime chokepoint through which a fifth of global oil consumption normally passes.

Viewed from Washington and Tehran, the breakthrough took the form of a 14-point memorandum of understanding that launches a 60-day negotiation period. During that window, Iran has committed to allowing free passage through the Strait of Hormuz, while the United States will suspend sanctions on Iranian oil exports and lift its naval blockade of Iranian ports. The deal, signed remotely by President Donald Trump and his Iranian counterpart, does not yet constitute a permanent peace, but it immediately alters the physical supply picture. Kuwait announced it would begin ramping up production, and traders in Gulf energy hubs reported a surge in inquiries for tanker loadings, signalling that regional exports are poised to return to pre-war volumes faster than many forecasters had anticipated.

Equity markets in New York absorbed the twin forces of geopolitics and monetary policy. Wall Street rebounded cautiously, with the broad S&P 500 and the technology-heavy Nasdaq adding more than 1 percent in morning trade, while the Dow Jones Industrial Average posted a more modest gain. The recovery followed steep losses the previous session, when the Federal Reserve raised its inflation forecast and signalled higher interest rates this year, propelling the dollar to a one-year high. Analysts in London described a market pulled between relief over easing supply risks and the drag of tighter US monetary conditions. “Politics and economics are front and centre,” one investment director noted, capturing a session in which oil’s slide and the Fed’s hawkishness jointly shaped sentiment.

From the perspective of international financial institutions, the price decline is expected to be significant but not catastrophic. Kristalina Georgieva, managing director of the International Monetary Fund, said oil was likely to fall further as the Strait of Hormuz reopens and nations replenish strategic reserves, yet she cautioned against expecting a collapse. The gradual nature of the tanker traffic recovery and the lingering uncertainty over the final terms of a permanent peace will temper the downward momentum. For now, the market is aggressively pricing in the return of Iranian barrels, but the path back to full supply normalisation remains contingent on the 60-day negotiation window and the durability of a ceasefire that has already survived four months of open conflict.