Oil Tumbles Below $100 As Hopes Of Us-Iran Deal Ease Supply Fears

Mumbai, May 25:Oil prices plunged more than 5% on Monday, with Brent crude slipping below the psychologically important $100-per-barrel mark, as investors grew hopeful that the United States and Iran may be moving closer to a peace agreement that could ease disruptions to global energy supplies. 

Brent crude futures dropped by $5.82 to trade at $97.72 per barrel, while US West Texas Intermediate (WTI) crude fell $5.77 to $90.83 per barrel. Both benchmarks touched their lowest levels in around two weeks. 

The sharp decline came after US President Donald Trump said a memorandum of understanding to reopen the Strait of Hormuz had been “largely negotiated,” fuelling hopes that tensions in the Middle East could cool further. The Strait of Hormuz is one of the world’s most critical oil transit chokepoints, handling a significant portion of global crude and LNG shipments. 

Markets Cheer Easing Supply Concerns

Sharp decline came as US President Donald Trump said a memorandum of understanding to reopen the Strait of Hormuz had been “largely negotiated”. Source: oilprice.com

The possibility of a reopening of the Strait of Hormuz significantly improved market sentiment after months of fears around supply disruptions caused by the Iran conflict and the US naval blockade in the region.

Oil prices had surged sharply in recent weeks as traders worried that prolonged disruptions in the Gulf could tighten global supplies and worsen inflationary pressures worldwide. Brent crude had briefly climbed well above $110 per barrel earlier this month amid fears of a prolonged energy crisis. 

The latest decline in crude prices also lifted broader risk appetite across financial markets. Asian equities rallied strongly on Monday, while US stock futures advanced as investors welcomed the possibility of easing geopolitical tensions. 

Caution Remains Despite Sharp Fall

Despite the steep decline, oil markets could remain volatile as negotiations between Washington and Tehran are still ongoing and significant disagreements persist.

Trump later reiterated that US blockades on Iran would remain in place until a formal agreement is finalised and verified, underscoring lingering uncertainty around the pace and durability of any deal. 

Even if an agreement is reached, restoring normal oil flows through the Strait of Hormuz may take time because of operational disruptions, shipping bottlenecks and infrastructure challenges. 

Falling Crude Seen Positive for India

The decline in crude prices is seen as supportive for India, one of the world’s largest oil importers, as lower oil prices could help ease inflationary pressures, reduce import costs and improve the country’s fiscal outlook.

Softer crude prices may also benefit sectors such as oil marketing companies, aviation, paints, tyres and logistics, all of which are highly sensitive to fuel costs.

Source:

• rates from oilprice.com