Global oil prices fell sharply again on Thursday following reports of a diplomatic breakthrough between the United States and Iran aimed at ending hostilities and reopening the Strait of Hormuz, a critical route for global crude shipments.
The development sparked optimism across energy markets, as the agreement is expected to restore stability to one of the world’s most important oil transit corridors, which had been disrupted during months of conflict between both nations.
Market sentiment was further supported by expectations that the reopening of the strait could ease supply concerns and reduce the risk premium that had driven oil prices higher in recent months.
However, broader financial markets remained cautious as attention shifted to the United States Federal Reserve, which signalled the possibility of further interest rate hikes before the end of the year due to persistent inflation pressures.
Crude oil prices extended losses, with both Brent and West Texas Intermediate falling by more than three per cent on the day, deepening a decline of over 15 per cent recorded since speculation of a peace deal began.
Analysts noted that the easing of geopolitical tensions had removed much of the “war risk” premium previously built into oil prices, especially concerns over supply disruptions through the Gulf region.
Under the reported agreement, both sides are expected to take steps to normalise energy flows, including commitments linked to sanctions relief and nuclear negotiations, though further discussions are expected.
Despite the decline in oil markets, global equities delivered mixed performance. South Korea led gains, driven by strong demand in semiconductor stocks, while several Asian and European markets recorded declines.
The divergence in market performance reflected ongoing uncertainty surrounding global inflation, central bank policy direction, and the broader economic outlook.
The Federal Reserve, in its latest policy stance, maintained interest rates but signalled that future hikes remain possible as inflation continues to exceed its target range.
Overall, markets reacted to a combination of easing geopolitical tensions in the energy sector and persistent macroeconomic concerns, leaving investors balancing optimism over supply stability with caution over inflation and monetary tightening.
