Oil prices fell after the United States and Iran signed an interim peace deal, continuing a decline that had been interrupted by a warning from US President Donald Trump that he might resume military operations.
Brent crude dropped 1.6% on Thursday morning in Asia, bringing the international benchmark back to nearly exactly where it stood 24 hours earlier. Brent futures for August delivery were at $78.43 a barrel at 02:00 GMT, only about 7% higher than before the US and Israel launched their war against Iran on February 28.
After several days of declines, Brent had surged above $81 a barrel on Wednesday after Trump warned that the US could “go back to dropping bombs” on Iran if the country did not “behave.”
Major stock markets in Asia opened higher on renewed optimism about an end to nearly four months of disruption to global energy supply chains. Japan’s Nikkei 225 rose 1.9% in early trading, reaching an all-time high. South Korea’s Kospi gained more than 1%, while Taiwan’s Taiex added around 1.3%. Hong Kong’s Hang Seng index bucked the trend, falling 1.7%.
US stock futures, which trade outside regular market hours and often foreshadow the next day’s moves, also rose, with contracts linked to the S&P 500 and Nasdaq Composite adding roughly 0.8% and 1.3%, respectively.
Pakistan’s Prime Minister Shehbaz Sharif, who mediated talks between Washington and Tehran, said on Wednesday that a memorandum of understanding (MoU) between the US and Iran had taken effect “immediately.” Sharif stated that Iran would “immediately open” the Strait of Hormuz and the US would “immediately” lift its naval blockade of Iranian ports, though it remained unclear whether the announcement would spur maritime traffic through the crucial waterway.
Shipping through the strait has fallen to a fraction of peacetime levels due to the risk from Iranian missiles, drones, and mines, as well as the US blockade. Although more than 500 vessels are estimated to be waiting to exit the Gulf through the strait, shipping companies have expressed concerns about a lack of clarity on how to ensure the safety of their ships and crews on the channel.
In a statement earlier this week, the Baltic and International Maritime Council (BIMCO), one of the world’s largest shipowner associations, said the US and Iran had yet to provide information on “key aspects such as timing and safe routes.” Jakob Larsen, BIMCO’s head of safety and security, said, “Due to the lack of detail and a history of overly optimistic commitments, we believe the security situation for the shipping industry remains uncertain, and we still consider starting transit at this point to be very risky. We advise shipowners to continue performing thorough risk assessments and call on all parties to prioritize the safety of seafarers.”
