Oil prices fell sharply at the start of the session after US President Donald Trump and his Iranian counterpart, Masoud Pezeshkian, signed a preliminary ceasefire agreement, a decision which should restore crude flows across the Strait of Hormuz, one of the most important maritime routes in the world.
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Thursday morning, at the time of writing, the WTI contract for delivery next month, the American benchmark, lost 2.3% to $75 per barrel, while Brent, the international barometer, fell by 2% to around $78 per barrel.
Both benchmarks remain above the approximately 70 dollars observed before the conflict, but they have fallen significantly compared to the peaks of more than 100 dollars reached only a few weeks ago.
The agreement opens a 60-day window for the two sides to negotiate a final settlement on Iran’s nuclear program, with Tehran agreeing in the meantime to dilute its stockpile of highly enriched uranium.
Crucial for energy markets, it lifts sanctions supported by Washington, allowing Iran to freely resume its oil exports, and once again clears the way for tankers leaving the Persian Gulf loaded with crude.
US President Donald Trump has assured that the strait will be fully reopened by Friday and that no rights of passage will be applied, a promise which encourages operators to bet on an easing of tensions on supply.
After signing the memorandum of understanding, Trump summed up the situation by miming the movement of his hands: “oil goes down, stocks go up.”
Oil market: reserves still at their lowest
This burst of optimism, however, comes against a backdrop of strong tensions.
In its June oil market report, the International Energy Agency said strategic oil reserves in advanced economies had fallen to their lowest level since 1990, with public stocks in OECD countries falling by 163 million barrels since start of the conflict under the effect of increased emergency releases.
The agency also reduced its forecast for global demand: it now expects it to contract until 2026, with high fuel prices and supply disruptions weighing on consumption, before a rebound the following year.
She warned, however, that any rebound in supply could be gradual, due to laborious mine clearance and continued disruptions to shipping routes, despite the interim agreement.
Flows passing through the Strait of Hormuz had already started to recover, going from their low point in May to around 12 million barrels per day in early June.
Stock markets mixed after the signal of possible rate hikes from the Fed
The equity markets, on the other hand, showed a more mixed picture after Wednesday’s losses on Wall Street, where the S&P 500 fell 1.2% after new projections from the Fed showing that almost half of monetary officials anticipate at least one rate increase this year.
The Dow Jones Industrial Average lost 1%, and the Nasdaq Composite lost 1.3%.
During his first press conference as president of the Fed, Kevin Warsh refused to say what level rates would be at at the end of the year and suggested that he would review the central bank’s communication, removing from its press release the usual indications on the future direction of monetary policy.
US President Donald Trump, who had long pressed Warsh’s predecessor to lower rates, was surprisingly relaxed about this decision.
“It’s okay. It doesn’t matter,” Trump told reporters in France on the sidelines of the G7 summit.
Asked about the prospect of a raise, he said it was “hard to believe”, but added that with Warsh now in office, he was being “guided by what he wants”.
Futures contracts on American indices were moving higher on Thursday at the start of the session, those on the S&P 500 gaining 0.9% and those on the Nasdaq Composite around 1.4%.
In Asia, the Nikkei 225 in Tokyo and the South Korean Kospi both jumped 2.3%, driven by hopes of an end to the war in Iran and strong demand for technology stocks.
In Europe, the session was more measured: the Euro Stoxx 50 increased by 1%, but the Stoxx 600, broader and pan-European, evolved in balance.
The British FTSE 100, the German DAX 30, the Italian FTSE MIB, the Spanish IBEX 35, the Dutch AEX and the Swiss CH20 all gained between 0.4% and 0.8% compared to their close on Wednesday.
The French CAC 40 was in the lead, with a gain of around 1.3%.
