Oil Prices Fall Below $100 as Hopes Rise for US-Iran Peace Deal

Global oil prices plunged sharply on Monday after signs emerged that the United States and Iran were moving closer to a peace agreement that could eventually reopen the strategically critical Strait of Hormuz and restore disrupted oil flows.

Brent crude futures for July dropped more than 5% to around $97.90 per barrel in early Asian trade, while US West Texas Intermediate (WTI) crude fell nearly 5.8% to about $91 per barrel. Brent also slipped below the key $100 mark for the first time since early May.

Despite the sharp correction, Brent prices remain more than 33% higher compared to levels before the conflict began in late February, when crude was trading near $70 per barrel.

Trump Signals Progress but Warns Against Rushing Deal

US President Donald Trump said over the weekend that a peace agreement with Tehran had been “largely negotiated,” raising hopes that the months-long conflict involving the US, Israel and Iran may finally ease.

Trump stated that discussions included reopening the Strait of Hormuz, one of the world’s most important energy shipping routes through which nearly 20% of global oil and LNG trade typically passes.

However, Trump later struck a more cautious tone, saying negotiators should “not rush into a deal.”

“Both sides must take their time and get it right. There can be no mistakes,” Trump said on Truth Social.

He also clarified that the US naval blockade on Iranian ports would remain “in full force and effect” until a final agreement is officially signed and certified.

Strait of Hormuz Remains the Key Market Trigger

The Strait of Hormuz has effectively remained blocked since the conflict escalated in late February, severely disrupting global energy trade and creating massive supply concerns.

It is estimated that nearly 10-11 million barrels per day of crude supply continue to remain shut in due to restrictions around the waterway.

However, experts warned that even after a peace deal is signed, it could still take 3-6 months for oil production, refinery operations and supply chains to fully normalise.

Indian Markets Rally on Relief Expectations

Asian equity markets reacted positively to the falling oil prices and hopes of reduced geopolitical tensions.

Indian share benchmarks rose on Monday after crude oil prices fell below $100 per barrel for the first time in more than two weeks on prospects of a deal to end the Iran war.

Global investors seemed to brush aside Sunday's warning from Trump that played down prospects of an imminent breakthrough in the three-month-old war.

India's benchmark Nifty 50 rose 0.94% to 23,941.85, and the BSE Sensex added 1.02% to 76,194.32, as of 9:45 a.m. IST.

Iran Says Discussions Advancing but Differences Remain

Iranian Foreign Ministry spokesperson Esmail Baghaei said negotiations with Washington had progressed in recent weeks and both sides’ positions were “converging.”

Iran is reportedly preparing a memorandum outlining terms for ending the conflict, including demands related to the removal of the US naval blockade and release of frozen Iranian assets.

However, major disagreements still remain over Iran’s nuclear programme and other strategic issues.

Iran’s semi-official Tasnim news agency warned that negotiations could still collapse if Washington refuses to ease restrictions on Iranian assets.

ICIS oil markets head Ajay Parmar said Iran currently holds a strong negotiating position and may continue pushing for better terms before agreeing to a final settlement.

Oil Markets May Stay Tight Despite Price Fall

Energy experts cautioned that while crude prices have corrected sharply, the broader oil market could remain tight through 2027 because of damaged infrastructure, depleted inventories and supply chain disruptions caused during the conflict.

Shipping Activity Slowly Resumes

Some oil and LNG shipments have already started moving through the region despite ongoing restrictions.

Bloomberg ship-tracking data showed that a supertanker carrying Iraqi crude successfully crossed the blockade zone and is heading to China’s Ningbo port, where it is expected to arrive on 12 June.

Iranian media also reported that 33 vessels, including oil tankers and container ships, recently passed through the Strait after receiving permission from the Islamic Revolutionary Guard Corps Navy.

A liquefied natural gas tanker carrying supplies for India also reportedly completed transit through the region.

Russia-Ukraine Conflict Adds Further Volatility

Apart from Middle East tensions, energy markets also remain volatile due to the ongoing Russia-Ukraine conflict.

Ukraine reportedly targeted Russia’s largest Black Sea oil terminal at Sheskharis along with major petrochemical infrastructure, while Russia simultaneously launched attacks on Ukrainian oil and gas facilities in the east.

The continuing attacks on energy infrastructure across both regions are keeping global supply concerns elevated despite the recent correction in crude prices.