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Oil prices sank further on Wednesday, with the international benchmark Brent trading below $80 per barrel for the first time since early March, as optimism continued to drive prices lower following a framework peace deal between the US and Iran that is expected to reopen the Strait of Hormuz by the end of the week.
The possibility of renewed traffic through the strait has helped ease fears of prolonged disruptions to energy supplies from the Gulf, a key source of global oil and liquefied natural gas exports.
This could mark an end to what the International Energy Agency (IEA) called the largest supply disruption in the history of the global oil market.
Oil stocks in OECD countries fall to lowest level since 1990: IEA
The interim peace deal between the US and Iran comes at a time when strategic oil reserves in advanced economies have fallen to their lowest level since 1990, the International Energy Agency (IEA) said on Wednesday. Governments have continued to tap emergency stockpiles to offset disruptions caused by the Gulf conflict.
At the same time, the agency warned that the conflict is also weighing on consumption.
In its June Oil Market Report, the IEA cut its global oil demand forecast, saying consumption is now expected to decline throughout 2026 as higher fuel prices and supply disruptions weigh on demand. The agency expects growth to return in 2027 as trade flows normalise and economic conditions improve.
Despite the peace agreement, however, the IEA cautioned that a recovery in oil supplies may not be immediate. The organisation said significant obstacles remain, including the slow clearance of mines and ongoing disruption to shipping routes, even if the interim US-Iran agreement helps Middle East oil exports recover.
Oil prices plunge as traders bet on US-Iran peace deal
International benchmark oil prices dropped as traders bet on US President Donald Trump’s promise that the strait would be fully open by Friday and operate without transit charges.
Brent crude for next month’s delivery was trading at $79 a barrel at around 10 am CET, and the US benchmark WTI cost $76 a barrel at the same time. European natural gas prices traded below €42 per megawatt-hour on Wednesday morning.
The price of Brent has come down sharply from its $100-plus level of a few weeks ago, and has now tumbled more than 33% over the past month, as market expectations have shifted abruptly. However, it could still take months for the energy industry to get back to full speed.
Many analysts remain cautious, as significant hurdles persist in the negotiations, including what to do with Iran’s nuclear programme. But the hope on Wall Street is that this agreement will mean a long-term fix to a conflict that has worsened inflation around the world.
Questions also remain over the speed at which regional production can recover. As for liquefied natural gas production, attention remains focused on Qatar’s Ras Laffan industrial complex, the world’s largest LNG export hub, following reports of significant damage to facilities there.
What Europe can expect
In a previous analysis, Euronews has outlined why European energy prices may not come down rapidly after the conflict is resolved, even if there is a decision to open the Strait of Hormuz.
Europe has been significantly affected, even though it sources only a small share of its oil and gas directly through the Strait of Hormuz, but it imports 80–85% of its oil overall, relying on international benchmark prices, particularly Brent crude, which has been significantly inflated by the crisis.
“Even if that peace is here tomorrow, still we will not go back to normal in the foreseeable future,” the EU’s Energy Commissioner Dan Jørgensen said in early April.
For prices to fall significantly across the bloc, war-risk insurance premiums and tanker freight rates will also need to decline, as both are key components of the delivered cost of crude.
And though freight rates appear to have stopped rising, there is little evidence yet of a sharp decline. At the same time, multiple shipping reports indicate insurers are still waiting for evidence that the Strait can operate safely before repricing risk.