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- The US and Iran signed an interim deal Wednesday to end their three-month conflict, reopening the Strait of Hormuz and sending oil prices to their lowest level since the war began.
- The reopening is flooding global markets with stranded crude, but sellers face an uphill battle, with Asian demand already covered through August and refiners bracing for weak profitability in H2.
The Strait of Hormuz, the world’s most critical oil chokepoint, is opening again.
After months of war-driven disruption, the United States and Iran signed an interim agreement on Wednesday that is already reshaping global energy markets.
Supply flows through the strait will take time to stabilize after the three-month conflict halted traffic and sent oil prices above $100 per barrel.
The Deal That Changed Everything
US President Trump and Iran’s President Pezeshkian signed a 14-point memorandum of understanding on Wednesday, bringing the agreement into effect two days ahead of schedule.
The deal calls for the immediate reopening of the Strait of Hormuz and lifting the US blockade on Iranian ports, with a 60-day deadline for negotiators to reach a final agreement for both sides to settle their disputes. ⁽¹⁾
Energy markets reacted sharply, with Brent crude trading below $78 per barrel yesterday, reaching its lowest level since the conflict began, and has dropped 38% from its April peak.
Ships Are Moving Again
The most visible sign of the deal’s early impact came from the resumed sea flows. Three Saudi-flagged tankers carrying around six million barrels of crude sailed through the Strait of Hormuz yesterday. Other vessels also reactivated their transponders to show their locations, a signal that crews and operators feel safer transiting the route. ⁽²⁾
According to ship-tracking firm Vortexa, 54 supertankers carrying approximately 87 million barrels of crude were still stuck inside the Gulf as of Thursday.
Analysts estimate that around 93 million barrels of non-Iranian supply remain stranded, alongside 72 million barrels of Iranian crude held on tankers. Once those volumes move, global supply will rise sharply. ⁽³⁾
Why Prices May Fall Further
The reopening could not have come at a more awkward time for oil sellers.
Gulf producers had already been quietly ramping up exports through ship-to-ship transfers off the UAE and Oman during the conflict, pushing spot differentials for Middle Eastern crude into discount territory earlier this week. ⁽⁴⁾
Now, with the Strait open and stranded barrels ready to flow, sellers face a buyer’s market. Most Asian refiners, which are the world’s largest consumers of Middle Eastern crude, have already covered their needs through August. ⁽⁵⁾
Chinese refining activity, already near a four-year low in May, is expected to fall further in June as several major refineries undergo maintenance, just as oil supply rises.
Analysts expect India’s demand for Gulf oil to rise between 400,000 to 600,000 barrels per day through August as refiners adjust their crude supplies. Regional oil prices also point to ample supply in the short term. ⁽⁶⁾
Not Over Yet
Despite the optimism in oil markets, the broader picture remains complicated.
Talks between US and Iranian negotiators set to take place in Switzerland were called off late yesterday after Vice President JD Vance dropped plans to travel to Geneva.
Switzerland’s foreign ministry confirmed the negotiations would not take place, though no reason was given. Iran had said it was ready for technical talks following Wednesday’s 14-point accord but wanted to see signs of US implementation first.
The memorandum gives both sides 60 days to negotiate a lasting settlement, a timeline that markets will be watching closely as they price in just how durable this peace really is.
