Oil prices tumbled on Tuesday to their lowest level since early March, extending Monday’s sharp sell-off as investors digested progress toward a U.S.-Iran peace agreement that could finally restore flows through the Strait of Hormuz and ease the worst global energy supply crisis in decades.
Brent crude futures fell 1.25% to $82.13 per barrel by early U.S. trading, while U.S. West Texas Intermediate futures dropped 1.41% to $79.67, briefly slipping below the psychologically important $80 level. The decline came after prices had already eased on revived diplomatic optimism, reflecting a market shifting from shortage fears toward potential surplus concerns once normal shipping resumes.
The latest moves follow a provisional framework agreed between Washington and Tehran that would extend the current ceasefire by 60 days and reopen the Strait of Hormuz to all shipping without Iranian tolls. U.S. President Donald Trump, arriving at the G7 summit in France, declared the deal signed and said a formal ceremony would take place on Friday in Geneva.
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“The deal’s all signed,” Trump said. He added that Vice President JD Vance would attend the signing, and that the strait would “completely reopen” on Friday, free of Iranian tolls.
Iranian President Masoud Pezeshkian described the agreement as an “important step” toward ending the fighting but cautioned that a final, lasting truce “has yet to take shape.” U.S. officials characterized the memorandum as a broad document, with detailed negotiations on Iran’s nuclear program, regional proxies, and missile capabilities to follow during the 60-day window.
Shipping Industry Remains Cautious
Despite the diplomatic breakthrough, shipping executives signaled that confidence will return slowly. Hapag-Lloyd, the German container shipping giant, welcomed the news as “good news for us, for our crews, and for our customers,” hoping its remaining vessels could transit the strait this weekend.
However, Jotaro Tamura, CEO of Japan’s Mitsui O.S.K. Lines, operator of one of the world’s largest tanker fleets, struck a more measured tone in an interview with the Financial Times. He said many operators would likely wait weeks before resuming full transit, needing concrete assurances beyond a high-level agreement.
“What will have to come in place is not just a simple agreement between the relevant countries, but it has to be material and translated into the real situations in the Strait of Hormuz, so that shipping lines can make themselves comfortable to go through,” he said.
Tamura noted that recent experiences have made shipowners wary, suggesting it could take “at least a couple of weeks or if not a month” before normal operations resume.
The price action reflects lingering uncertainty even as optimism builds. Oil futures had climbed sharply earlier on escalation fears before reversing course. Brent and WTI are now trading well below the near-$120 peaks reached in March, but remain elevated compared to pre-war levels around $72.
OPEC+ agreed to its fourth monthly output increase, but analysts described the move as largely symbolic while the strait remains restricted. Jorge Leon of Rystad Energy noted.
“An OPEC+ production increase means very little while the Strait of Hormuz remains closed. When the Strait of Hormuz reopens, the market could move very quickly from fear of shortage to fear of surplus,” he said.
The group is nearing completion of unwinding its 2023 cuts, with roughly 567,000 bpd left to return by September if the current pace holds.
A sustained reopening of the strait would ease one of the most severe energy shocks in modern history, potentially lowering global inflation pressures and giving central banks more room to maneuver. For import-dependent economies, it could reduce trade deficits and support growth. However, the transition may not be immediate, as insurance costs, crew confidence, and physical infrastructure repairs take time.
The G7 summit in France this week is expected to focus heavily on the Middle East situation, with further details on the memorandum likely to emerge. Trump’s insistence on a toll-free strait and Iran’s emphasis on joint control with Oman highlight remaining points of friction that could affect the pace of normalization.
For now, oil markets are pricing in cautious optimism. The sharp drop on Tuesday suggests traders are betting on eventual supply relief, but the premium for geopolitical risk has not entirely vanished. Any delay in implementation or breakdown in talks could quickly reverse the recent price declines.
As negotiators work toward a more permanent resolution, energy traders, policymakers, and businesses remain on edge, aware that the path from framework to full restoration of flows remains uncertain.