Oil prices fell in early trade in Asia on Monday after Pakistan, which has been mediating an end to the US-Iran war, announced a deal that President Donald Trump said would see the reopening of the key Strait of Hormuz shipping route according to BBC.
Brent crude, the global oil benchmark, was 4% lower at $83.81 (£62.29) a barrel, while US-traded oil was down 4.7% at $80.89.
Pakistan’s prime minister Shehbaz Sharif said an official signing ceremony would be on Friday, 19 June in Switzerland.
Iran’s Deputy Foreign Minister Kazem Gharibabadi confirmed in a phone call on state TV that a deal with the US had been finalised, while Trump posted on social media to “let the oil flow!”.
But Vandana Hari from energy markets analysis firm Vanda Insights said a lack of detail on what has been agreed “is likely to inject unease and uncertainty into the market.”
This could mean a week of uncertainty and volatility for the oil market, she added.
The strait had been effectively closed since shortly after the US and Israel launched airstrikes on Iran on 28 February.
Tehran had threatened to attack vessels using the crucial waterway, through which around 20% of the world’s oil and liquefied natural gas (LNG) normally passes.
Global energy markets have been on a wild ride in recent months, with prices often rising or falling sharply in response to developments in the US-Israel war with Iran.
Brent crude, which was trading at around $70 a barrel before the conflict started, peaked at about $120 during the war.
Energy market experts have also warned that the movement of oil through the strait is unlikely to immediately return to pre-war levels.
Andrew Lipow from consulting company Lipow Oil Associates said mines would first need to cleared from the waterway, which could take from a few weeks to up to six months.
He also said there is a large backlog of tankers waiting to use the waterway and that restarting oil production and getting the loading of ships back to normal levels could take weeks.
Asian stock markets also rose on Monday as investors welcomed the deal.
Japan’s Nikkei 225 share index was 4.3% higher in morning trade while the Kospi in South Korea was up by more than 5%.
The region was hit particularly hard by higher energy prices as it is heavily reliant on the Middle East for its oil and LNG supplies.