Oil prices erase war gains after Strait of Hormuz reopens under US-Iran deal
Global oil prices have erased all gains from the four-month Iran conflict as the Strait of Hormuz returns to normal traffic, flooding the market with supply and triggering the deepest discounts in over a decade for some grades.
After nearly four months of conflict, the Strait of Hormuz has reopened to pre-war traffic levels under a preliminary US-Iran peace agreement, unleashing a wave of crude supply that erased all war-related gains in oil prices. By Wednesday, Brent crude had fallen below $73 a barrel and WTI dropped near $69, levels last seen on February 27, the day before hostilities began.
From blockade to free passage
The breakthrough came on Monday when President Donald Trump announced that Iran had agreed to free navigation through the strait for a 60-day negotiation window. On Wednesday, Trump posted on Truth Social that Iran had confirmed it would not charge any transit fees, insurance costs, or other levies on vessels passing through Hormuz. US Energy Secretary Chris Wright told a New York forum that 72 ships carrying 20 million barrels of oil transited the strait in the previous 24 hours, matching the daily average before the war.
Iran informed the United States that, despite false reports to the contrary, Iran does not charge, nor does it seek to charge, any tolls, insurance costs, or any other fees for ships transiting the Strait of Hormuz. If this information is false, negotiations will be terminated immediately!
Today we have normal flows.
- US-Israel military strikes on Iran begin; Iran blocks Strait of Hormuz.
- US and Iran sign preliminary peace memorandum; free navigation through Strait of Hormuz for 60-day negotiation period.
- US Energy Secretary Chris Wright reports 72 ships and 20 million barrels of oil passed through Hormuz in 24 hours, matching pre-war daily average.
- Brent crude falls to around $73/barrel, erasing all war-related gains; Angola sells crude at nearly $10 below Brent, the deepest discount in over a decade.
Flood of supply hits global markets
The lifting of the blockade has flooded major fuel markets with supply. Traders are receiving abundant purchase offers, and many producers are selling at steep discounts. The most extreme example is Angolan crude, which is now trading at nearly $10 per barrel below the Brent benchmark, the largest discount in over a decade. China has been a major buyer, and some Chinese refineries are themselves offering Angolan cargoes for resale, marking a radical reversal of typical flows. Kpler data shows that over 20 tankers carrying around 35 million barrels have already passed through the strait since the agreement, with most cargoes heading to Asian markets for early August delivery.
Analysts see further price relief, but risks linger
Citigroup analysts assess that the tightest period for the oil market may be over and Brent could dip to $60–65 a barrel within six to twelve months as logistics normalize. JP Morgan projects a more gradual decline, with Brent averaging $86 in Q3, $80 in Q4, and $78 at year-end. The return of Iranian exports, potentially 1.5 million barrels a day, adds further downward pressure. Meanwhile, the futures curve has flipped into contango for the first time since February, signaling that near-term supply fears have abated. However, risks remain: the Islamic Revolutionary Guard Corps warned on Thursday that safe navigation would be permitted only on routes designated by Tehran, and ships not complying would face consequences. Additionally, Wright acknowledged that mines planted in the strait could delay full normalization by several weeks.
A fragile calm
The peace memorandum leaves the long-term status of the strait to be negotiated between Iran, Oman, and Gulf states. Wright insisted that Iran would not have the ability to close the strait again, calling it a key lever of pressure that the US is removing. Yet the IRGC statement and the ongoing mine-clearing effort underscore the fragility of the current calm. For now, however, the return of 20 million barrels a day through Hormuz has broken the supply panic, bringing the cheapest gasoline in months to consumers worldwide.
