SINGAPORE – The global oil prices on Monday fell sharply, touching their lowest levels since March, after signs of a diplomatic breakthrough between the United States and Iran eased concerns over disruptions to energy supplies in the Middle East.
International benchmark Brent crude dropped $3.58, or 4.1 per cent, to $83.75 per barrel by 0004 GMT, while US West Texas Intermediate (WTI) crude declined $4.01, or 4.72 per cent, to $80.87 a barrel.
Both benchmarks had already posted losses of more than 3 per cent in the previous trading session.
The decline followed statements from US President Donald Trump and Iran’s Deputy Foreign Minister Kazem Gharibabadi indicating that an initial understanding had been reached to end hostilities and restore maritime traffic through the strategic Strait of Hormuz.
According to Pakistani officials involved in mediation efforts, Washington and Tehran are expected to sign a memorandum of understanding in Switzerland later this week.
President Trump announced on Sunday that vessels would be allowed to pass through the Strait of Hormuz without additional charges and that the US naval blockade of Iranian ports would be lifted.
Iranian media reports said the proposed agreement envisages reopening the vital waterway within 30 days under arrangements overseen by Tehran.
Market analysts said the prospect of oil exports resuming through the Strait of Hormuz prompted traders to unwind the geopolitical risk premium that had supported prices during the conflict.
The closure of the strait for more than three months had removed millions of barrels of oil and gas supplies from global markets. The route is considered one of the world’s most critical energy corridors, handling roughly one-fifth of global oil and liquefied natural gas shipments.
Investors are now focused on how quickly regional producers can restore output and exports, as well as whether shipping activity in the Gulf returns to normal levels.
Analysts noted that even a partial recovery in oil flows through the Strait of Hormuz could significantly ease supply concerns and restore expectations of an oversupplied market.
Meanwhile, Iranian Deputy Foreign Minister Gharibabadi said negotiations on a broader agreement would continue during a proposed 60-day ceasefire period.
In a further sign of diplomatic progress, the E4 countries — the United Kingdom, France, Germany and Italy — said they were prepared to consider easing sanctions on Iran in response to steps related to its nuclear programme.
Despite the optimism, market observers cautioned that uncertainty surrounding future negotiations, particularly on nuclear issues, could limit further declines in oil prices in the near term.
