Global oil prices collapsed on Thursday to levels not seen since the opening days of the Iran war, after President Donald Trump and his Iranian counterpart, Masoud Pezeshkian, separately signed a memorandum of understanding to end hostilities and reopen the Strait of Hormuz. Brent crude futures slid more than 2 percent to around $77.90 a barrel, while West Texas Intermediate sank below $75, in some trading windows touching intraday lows not recorded since the first week of March. The sell-off erased the war premium that had gripped energy markets for more than three months, as the interim accord promised to lift US sanctions on Iranian oil exports and restore free passage through the world’s most critical energy chokepoint.

The signing itself was a characteristically theatrical affair. Trump put his name to the document in thick black ink at a candlelit dinner with French President Emmanuel Macron at the Palace of Versailles, on the margins of the G7 summit. Macron, who had hosted the gathering, hailed the moment with a shouted “bravo”, drawing a parallel with the treaty that ended the First World War in the same gilded halls. Hours later, aboard his return flight, Trump lashed out on social media at “fools” who accused him of being too soft on Tehran, pointing to record stock market highs and tumbling oil prices as vindication. Iranian foreign ministry spokesman Esmaeil Baqaei confirmed Pezeshkian had also signed, adding that the real test now lay in implementation.

The 14-point memorandum triggers a 60-day negotiation period, during which Iran will permit toll-free transit through the Strait of Hormuz, with full commercial traffic expected to resume within 30 days. The mere prospect of a normalised flow of crude has already begun to reshape physical markets. Tankers carrying nearly 10 million barrels of stranded oil have emerged from the strait or are in the process of transiting it, while Kuwait announced it would begin ramping up production. From London trading desks to Singapore refineries, analysts described a market aggressively pricing in a faster-than-expected return of Iranian barrels, though some cautioned that supply could remain constrained even after the waterway fully reopens.

Viewed from Washington, the deal offers the administration a powerful political narrative ahead of a Federal Reserve that has just signalled higher interest rates to tame persistent inflation. Wall Street equities pushed higher in early trading, recovering some ground lost after the Fed’s hawkish tilt, but the dominant story was the slide in energy costs. In Latin America, where fuel price rises have stirred public discontent, the drop offered a measure of relief, while Asian importers watched Brent’s retreat with cautious optimism. Yet across the Middle East, seasoned observers warned against mistaking an armistice for a durable peace. The memorandum leaves unresolved fundamental disputes, and questions are already being raised about the credibility of the United States as a long-term guarantor of freedom of navigation.

For all the market euphoria, the path ahead remains fraught. The 60-day clock is ticking on negotiations that must translate a provisional ceasefire into a binding framework, and the history of US-Iran diplomacy is littered with collapsed understandings. Analysts in European capitals note that the deal is best understood as an incomplete pause—one that could quickly unravel if either side judges the other to be acting in bad faith. For now, the Strait of Hormuz is inching back toward normality, and the price of a barrel of oil is reflecting relief rather than resolution.