US-Iran peace deal sends oil prices tumbling, but return to pre‑war fuel costs months away

More than 100 days of the most severe disruption on record to global energy supplies eased on Monday after the US and Iran reached a preliminary peace deal. Brent crude fell to its lowest level in over three months, while European wholesale gas dropped around 6%.

Oil markets react

Brent crude dropped 5.2% to $82.80 a barrel, according to The Irish Times, while The Guardian and The Scotsman reported prices around $83, down from the crisis peak of $126 a barrel and still well above the $69 average recorded last year. The US benchmark also fell sharply. European stock markets rallied early before paring gains: the FTSE 100 ended 0.6% higher, the Cac 40 and Dax both lifted 1.7%, and Germany’s 10‑year bond yield fell to 2.945%, its lowest since late May.

Prices would drop like a rock once the strait reopens.

Strait of Hormuz still blocked

Since the US and Israel struck Iran on 28 February, the Strait of Hormuz has effectively been closed to tankers. About one‑fifth of the world’s oil and liquefied natural gas normally passes through the chokepoint. Its blockade sent crude rocketing and fuelled fears of a global inflation spike. The deal announced on Sunday is set to be signed on Friday, but many details remain unresolved and the strait will not reopen immediately. A 60‑day negotiation on Iran’s nuclear phaseout will follow, with the waterway cleared for mine removal only thereafter.

Trump has to sell this at home as a victory. Lower gasoline price and maybe US republicans survive the midterm elections.

Consumer relief far off

US petrol prices have already eased from the early‑May peak of $4.48 per gallon but remain elevated. AAA reported a national average of $4.06 on Monday, 40% higher than a year earlier. Patrick De Haan of GasBuddy warned that inventories are so depleted that pump prices may not return to pre‑war levels until 2027, even if the ceasefire holds. Summer travel demand, port bottlenecks and the need to repair damaged oil infrastructure in the Gulf will delay any substantial drop.

It may take many months, if not beyond a year, for global oil inventories to recover to pre‑war levels.

Markets and inflation

Analysts said the falling energy prices should eventually ease inflationary pressures. The Bank of England faces a rate decision on Thursday amid stalling UK growth, GDP contracted 0.1% in the last quarter, and persistent price rises. Susannah Streeter of the Wealth Club noted that crude is still 16% higher than just before the war and gas prices are more than 30% above pre‑crisis levels, reflecting lingering nervousness about the peace process and the time needed to restore energy flows.

With energy prices falling back, inflationary pressures should start to ease off.

Remaining uncertainties

Buyers must now race to refill depleted emergency crude stockpiles, which will keep oil prices in the $80–90 range for the rest of the year, market observers believe. Iran is expected to favour a gradual reopening to maintain political leverage, and the cooperation of the regime in Tehran remains a critical variable. The trade route may not begin to function normally until July at the earliest.