Oil prices fell below $80 per barrel on Tuesday as markets reacted positively to a planned reopening of the Strait of Hormuz, easing concerns over global supply disruptions and inflationary pressure.
Brent crude, the international benchmark, dropped by about 4 per cent to $79.87 per barrel, its lowest level in three months before recovering slightly. US West Texas Intermediate also declined by 4.7 per cent to below $77 per barrel.
US President Donald Trump said the Strait of Hormuz would “completely open” once Washington and Iran sign a peace agreement scheduled for Friday in Switzerland.
Iranian media reported that several vessels had already begun passing through the waterway, raising hopes of improved global oil flows.
Financial markets reacted cautiously, with mixed performance across global indices. While the Dow Jones rose, the S&P 500 and Nasdaq recorded slight losses as investors weighed the implications of the developing agreement.
Analysts said markets were adjusting after recent gains, noting that uncertainty remained over the final terms of the deal.
“It’s normal for markets to want to consolidate their gains after strong up days, especially now that we’re still trying to figure out exactly what’s in the agreement that’s been signed,” said Steve Sosnick of Interactive Brokers.
European markets closed higher, while Asian equities ended mixed, reflecting cautious optimism about the potential easing of geopolitical tensions.
Kathleen Brooks of XTB said markets were beginning to factor in a “peace dividend,” adding that European indices were gradually catching up with the United States.
Despite the price decline, analysts warned that oil markets could remain volatile in the short term, as supply conditions remain tight and geopolitical risks persist.
Susannah Streeter of Wealth Club said oil was trading at its lowest level in two months but still remained above pre-conflict levels due to lingering uncertainty.
Meanwhile, US energy data showed strategic petroleum reserves had fallen to their lowest level since 1983, indicating sustained demand pressures even amid easing tensions.
Attention is also shifting to upcoming central bank decisions, with the US Federal Reserve expected to hold interest rates steady as it assesses the global economic impact of the Iran conflict.
The Bank of England is also expected to maintain its current policy stance, while Japan recently raised interest rates to their highest level since 1995.
In corporate markets, tech stocks gained support from strong performance by Elon Musk’s SpaceX, which saw its valuation surge after its recent listing.