Oil prices fell on Tuesday after President Donald Trump said the crucial Strait of Hormuz will reopen for commercial shipping as soon as Friday.
Brent crude futures, the international standard, were down 3.93% to $79.9 a barrel. West Texas Intermediate futures were down 3.9% at $76.34 a barrel. Brent crude and West Texas Intermediate prices fell around 5% Monday to settle at their lowest level since March 4.
Oil prices have fallen sharply with the U.S.-Iran peace deal set to be signed on Friday, although the exact terms are yet to be confirmed. The most crucial factor is how quickly the Strait of Hormuz—which normally carries around a fifth of the world’s daily oil traffic—returns to normality.
“The deal is already signed and the strait is already partially opened,” Trump said Monday at the start of Group of Seven talks. “Ships are starting to go out now, and on Friday it will be completely opened.”
However, senior U.S. officials said it could take more than two weeks to resume normal shipping, The Wall Street Journal reported. It is unclear whether Iran would continue to control the strait, and whether it would impose tolls.
“The [peace] deal’s announcement led to a clear fall in oil prices, with Brent crude at a three-month low. But we also saw the futures curve increasingly normalise, as longer-dated futures moved more in line with the front-end price,” wrote Deutsche Bank analyst Henry Allen in a research note. “In other words, investors are no longer pricing a sharp fall in oil prices over the next six months, as that was predicated on an agreement that’s now been announced.”
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