Crude Tumbles to Three-Month Low as US and Iran Sign Historic Deal to Reopen Strait of Hormuz

​LONDON / WASHINGTON — Global energy markets experienced a sharp sell-off today as oil prices plunged below the $80 threshold. The downturn follows confirmation that United States President Donald Trump and Iranian President Masoud Pezeshkian have signed a landmark interim peace agreement, effectively halting a devastating four-month military conflict that has choked global supply chains.

​International benchmark Brent crude futures dropped 2.7% to settle near $77.40 per barrel, hitting its lowest trading level since March 2—just days after the conflict erupted. West Texas Intermediate (WTI) followed suit, tumbling over 3% to hover around $74.43 per barrel. The rapid decline marks a major unwinding of the war premium that had previously driven Brent as high as $120 per barrel.

​The Islamabad MoU: Immediate Terms and Execution

​The initial framework, formally titled the Islamabad Memorandum of Understanding (MoU), was brokered under intense diplomatic mediation by Pakistani Prime Minister Shehbaz Sharif. While a formal, diplomatic signing ceremony is slated to take place in Switzerland on Friday, officials confirmed the pact entered into force with immediate effect following electronic signatures from both heads of state.

​According to leaked drafts and official briefings, the 14-point stabilization agreement establishes an immediate de-escalation framework:

ADVERTISEMENT

• ​Waterway Reopening: Iran will instantly reopen the strategically vital Strait of Hormuz to commercial vessels with zero transit fees or disguised service tolls.
• ​Blockade Dissolution: The United States will immediately stand down its naval blockade of Iranian ports, allowing safe maritime passage.
• ​60-Day Diplomacy Window: The agreement buys a temporary 60-day window of stability. During this time, comprehensive technical negotiations will begin to address Iran’s highly enriched uranium stockpile and establish a timeline for permanent US sanctions relief.
• ​Rehabilitation Fund: The US and international partners are expected to construct a $300 billion financial package dedicated to Iran’s economic rehabilitation, conditional on compliance.

​Speaking to reporters outside the Palace of Versailles following a G7 dinner hosted by French President Emmanuel Macron, President Trump defended the sudden diplomatic pivot.

​”If we didn’t do this deal, we could have dropped more bombs for another two, three, four weeks, but you would never have the Hormuz strait open,” Trump stated, acknowledging that military options had reached a point of diminishing returns.

​Shifting Realities in the Shipping Lanes

​The immediate market impact reflects relief over the return of the world’s most critical energy transit route. The closure of the Strait of Hormuz had cut off nearly 14 million barrels per day of global crude supply, roughly one-fifth of the global energy market.

Despite the aggressive downward pricing by commodity traders, energy analysts urge caution regarding actual physical supply. Industry groups point out that substantial operational hurdles remain before oil flows normalize.

​The security situation in the Gulf remains highly volatile for shipowners. Before tankers resume standard routes at full capacity, naval units must navigate significant backlogs, address unresolved maritime insurance structures, and conduct extensive mine-sweeping operations to clear the regional waters of drones and ordnance.​Market Ripple Effects​The sudden slump in crude prices triggered immediate volatility across international stock markets. In London, the commodity-heavy FTSE 100 Index slid 0.7% shortly after the opening bell, dragged down by steep losses in energy heavyweights BP and Shell, which both saw share values drop by more than 1%. Power providers Centrica and National Grid similarly closed lower.​Conversely, broader Asian and European stock markets rallied on the prospect of eased inflationary pressures, further supported by the passing of highly anticipated central bank policy meetings.​However, energy analysts note that oil’s downward trajectory may face a floor. Persistent domestic inflation within the United States has led a growing number of Federal Reserve policymakers to signal potential interest rate hikes later this year, a macroeconomic shift that could curb global growth and alter long-term demand models.