Oil hits 2-week low as US-Iran peace deal moves closer
Oil prices fell to their lowest levels in two weeks on Monday as hopes grew that the U.S. and Iran were inching closer to a peace agreement, even as major disagreements persisted over key issues, including restrictions on the Strait of Hormuz that continue to disrupt Middle East oil supplies.
On Saturday, U.S. President Donald Trump said Washington and Tehran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz, a route that handled nearly one-fifth of global oil and liquefied natural gas shipments before the conflict began.
Crude oil price on May 25
Brent crude futures dropped $4.71, or 4.55%, to $98.83 a barrel, while U.S. West Texas Intermediate crude declined $4.57, or 4.73%, to $92.03 a barrel. Earlier in the session, both benchmarks touched their weakest levels since May 7.
Last week, U.S. crude prices slumped more than 8%, while Brent lost over 5%, after Trump said he had cancelled imminent airstrikes against Iran to allow more time for diplomacy. Despite the recent pullback, oil prices are still up more than 30% since the U.S. and Israel launched attacks on Iran on Feb. 28.
Still, negotiations remain complicated. Trump said on Sunday that several difficult issues continue to divide the two sides and indicated that the U.S. was not in a hurry to finalise an agreement.
“The negotiations are proceeding in an orderly and constructive manner, and I have informed my representatives not to rush into a deal when that time is on our side,” Trump said in a social media post on Sunday.
Iran has effectively enforced a blockade in the Strait of Hormuz since early March, requiring ships to obtain clearance before passing through the route or risk being targeted. The restrictions were imposed after U.S. and Israeli strikes killed Iran’s Supreme Leader Ayatollah Ali Khamenei along with several senior leaders.
The Strait of Hormuz remains one of the world’s most critical oil chokepoints, with roughly 20% of global oil supply moving through the passage before the war. Iran’s blockade has sharply reduced crude exports from the Middle East, leading to what has been described as the largest supply disruption in history.
Even if a deal is reached, analysts believe it could take several months for oil shipments through the strait to fully normalise and for damaged energy infrastructure to be repaired.
Earlier this month, Saudi Aramco CEO Amin Nasser warned that disruptions in Hormuz could delay stability in global oil markets until 2027, with nearly 100 million barrels of oil supply per week potentially impacted. Saudi Aramco is the world’s largest oil producer.
Meanwhile, Morgan Stanley said the oil market was in “a race against time,” cautioning that the factors preventing crude prices from rising further may weaken if the Strait of Hormuz remains shut through June.
The brokerage added that higher U.S. crude exports and softer demand from China have so far helped prevent a deeper supply shock. However, it warned that an extended closure of Hormuz could tighten global supplies again if disruptions continue beyond what the U.S. and China can comfortably absorb.
( Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
On Saturday, U.S. President Donald Trump said Washington and Tehran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz, a route that handled nearly one-fifth of global oil and liquefied natural gas shipments before the conflict began.
Crude oil price on May 25
Brent crude futures dropped $4.71, or 4.55%, to $98.83 a barrel, while U.S. West Texas Intermediate crude declined $4.57, or 4.73%, to $92.03 a barrel. Earlier in the session, both benchmarks touched their weakest levels since May 7.
Last week, U.S. crude prices slumped more than 8%, while Brent lost over 5%, after Trump said he had cancelled imminent airstrikes against Iran to allow more time for diplomacy. Despite the recent pullback, oil prices are still up more than 30% since the U.S. and Israel launched attacks on Iran on Feb. 28.
Still, negotiations remain complicated. Trump said on Sunday that several difficult issues continue to divide the two sides and indicated that the U.S. was not in a hurry to finalise an agreement.
“The negotiations are proceeding in an orderly and constructive manner, and I have informed my representatives not to rush into a deal when that time is on our side,” Trump said in a social media post on Sunday.
Iran has effectively enforced a blockade in the Strait of Hormuz since early March, requiring ships to obtain clearance before passing through the route or risk being targeted. The restrictions were imposed after U.S. and Israeli strikes killed Iran’s Supreme Leader Ayatollah Ali Khamenei along with several senior leaders.
The Strait of Hormuz remains one of the world’s most critical oil chokepoints, with roughly 20% of global oil supply moving through the passage before the war. Iran’s blockade has sharply reduced crude exports from the Middle East, leading to what has been described as the largest supply disruption in history.
Even if a deal is reached, analysts believe it could take several months for oil shipments through the strait to fully normalise and for damaged energy infrastructure to be repaired.
Earlier this month, Saudi Aramco CEO Amin Nasser warned that disruptions in Hormuz could delay stability in global oil markets until 2027, with nearly 100 million barrels of oil supply per week potentially impacted. Saudi Aramco is the world’s largest oil producer.
Meanwhile, Morgan Stanley said the oil market was in “a race against time,” cautioning that the factors preventing crude prices from rising further may weaken if the Strait of Hormuz remains shut through June.
The brokerage added that higher U.S. crude exports and softer demand from China have so far helped prevent a deeper supply shock. However, it warned that an extended closure of Hormuz could tighten global supplies again if disruptions continue beyond what the U.S. and China can comfortably absorb.
( Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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