Thursday, June 18, 2026 - Oil prices fell further below $80 per barrel on Thursday,
June 18, after the United States and Iran signed a peace agreement aimed at
ending the conflict between the two countries and reopening the strategically
important Strait of Hormuz.
Benchmark Brent crude dropped by 2% to $77.90 per barrel,
after briefly falling to $77.10 during trading. The decline followed
confirmation from Pakistan’s Prime Minister, Shehbaz Sharif, who said leaders
of both countries had signed the agreement, paving the way for the immediate
reopening of the Strait of Hormuz and the lifting of the US naval blockade.
According to Sharif, “Iran will instantly reopen the Strait
of Hormuz and the United States of America will immediately lift the naval
blockade.” Although a formal signing ceremony is scheduled to take place in
Switzerland on Friday, the agreement is already in effect. The deal guarantees
free passage through the Strait of Hormuz for an initial period of 60 days
while further negotiations continue.
The Strait of Hormuz is one of the world's most critical
energy routes, carrying around one-fifth of global oil and gas supplies. During
the conflict, fears of prolonged disruption pushed oil prices as high as $120
per barrel. However, prices have now retreated closer to pre-conflict levels,
with Brent crude approaching the $73 per barrel mark recorded before
hostilities began.
The drop in oil prices weighed on energy stocks,
contributing to a decline in London’s FTSE 100 Index, which fell 0.7% shortly
after markets opened. Shares in major energy companies BP and Shell both
declined by more than 1%, while Centrica and National Grid also recorded losse
US President Donald Trump confirmed the agreement during a
dinner hosted by French President Emmanuel Macron at the Palace of Versailles
following the G7 summit in France. Under the initial peace deal, Iran has
agreed not to develop or acquire nuclear weapons and will downgrade its
stockpile of highly enriched uranium. In exchange, the United States will ease
certain sanctions, allowing Iran to resume unrestricted oil exports.
Susannah Streeter, chief investment strategist at Wealth
Club, said the agreement was placing downward pressure on oil prices as
additional Iranian oil supplies are expected to enter global markets.
“The digital signing of the interim agreement between the US and Iran, ahead of an official ceremony on Friday, is exerting a fresh downward force on prices, as new supplies are expected to hit the market just as demand has been weakened by rationing and energy-efficiency measures,” she said.
The fall in crude prices is expected to ease inflationary pressures and could help reduce fuel and energy costs for consumers after recent price increases linked to the conflict.
However, investor sentiment remained cautious after comments
from newly appointed US Federal Reserve Chairman Kevin Warsh suggested the
possibility of future interest rate increases. The remarks surprised markets
and contributed to a 1% decline in the Dow Jones Industrial Average overnight.
Chris Beauchamp, chief market analyst at IG, said Warsh's
comments signalled a tougher approach to monetary policy than many had
anticipated. “If last night’s press conference was Warsh’s attempt to put clear
blue water between him and Donald Trump, then he has succeeded,” Beauchamp
said. “Far from being a rate-cut obsessive, he has taken the committee down a
more hawkish path, one they seem happy to follow.”
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