Oil falls 5% on hopes of US-Iran deal on Hormuz

Oil prices ​fell about 5 per cent to a three-month low on Tuesday as traders hoped the US and Iran would agree to end the war and allow oil to flow through the Strait of Hormuz.
Prices, which were already down about 4% on Tuesday morning, extended those losses following a Wall Street Journal report that the US would allow Iran to immediately begin selling oil and fuel under the memorandum of understanding.
Brent crude futures fell $4.25, or 5.1 per cent, to $78.92 a barrel. US West Texas Intermediate crude fell $4.80, or 5.9 per cent, to $75.95.
The drop put Brent on track for its lowest ⁠close since March 2 and kept it in technically oversold territory for a third day in a row for the first time since October ⁠2025. WTI was on track for its lowest close since March 4. Oman crude oil for August 2026 delivery settled at $72.99 per barrel. This represents a decrease of $3.94 from Monday’s price of $76.93.
Before the Iran war started on February 28, both ⁠crude benchmarks were trading around $65 to $70 a barrel. Oil prices sank nearly 5% on Monday after US President Donald Trump announced an interim deal to end the US-Israeli war with Iran. Doubts, however, swirled around the interim deal on Tuesday, with warnings that shipping traffic and energy exports could take weeks to recover and details of the agreement yet to be made public. The deal would extend a tenuous ceasefire announced in April by another 60 ​days and reopen the strait, which ⁠Iran has effectively blocked since the US and Israel first attacked Iran. About 20 per cent of global oil supplies passed through ​the strait before the war. That preliminary agreement prompted investment banks, including Goldman Sachs, Morgan Stanley and Citi, to lower their oil price forecasts.
Other factors weighing on oil prices included worries about China’s economy, rising global inflation and interest rates, and US calls for peace between Russia and Ukraine.
In China, the world’s second-biggest economy showed increasing unevenness in May. A settlement in the Ukraine war could result in the lifting of some sanctions on Russia, which could allow Moscow to export more oil. Russia was the world’s ​third-biggest crude oil producer behind the US and Saudi Arabia in 2025, according to data. — Reuters