Oil Slumps to Lowest Price Since US–Iran Conflict as Supply Fears Ease

Global oil prices have fallen sharply, hitting their lowest level since the start of the recent US–Iran conflict, as markets react to easing geopolitical tensions and expectations of improved crude supply flows.

Benchmark crude prices, including Brent and West Texas Intermediate (WTI), extended a multi-day decline after traders increasingly priced in a faster-than-expected recovery in exports from the Middle East. The drop comes as diplomatic progress between the United States and Iran continues to reduce fears of prolonged disruption in one of the world’s most important energy corridors.

The latest decline follows weeks of volatility triggered by fighting and diplomatic breakdowns in the region. At the height of tensions, concerns over the Strait of Hormuz—a key shipping route for global oil—had pushed prices significantly higher. That strait handles roughly one-fifth of global oil shipments, making it one of the most strategically sensitive points in global energy trade.

Oil prices fell sharply on Thursday, June 18, dropping to their lowest levels since the outbreak of the US-Iran conflict, as an interim agreement between the United States and Iran improved prospects for global crude supply.

According to a new Reuters Report, Brent crude futures declined by $1.53, or 1.9 per cent, to $78.02 per barrel, while U.S. West Texas Intermediate (WTI) crude fell $2.22, or 2.9 per cent, to $74.57 per barrel.

Brent crude touched its lowest level since the first trading session following the initial US-Israeli strikes on Iran, while WTI dropped to its weakest level since early March.

Market sentiment was driven by expectations of increased Iranian oil exports after Washington and Tehran signed a 14-point memorandum of understanding aimed at de-escalating tensions.

“The selloff extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent U.S.-Iran memorandum of understanding,” said IG market analyst Tony Sycamore.

However, sentiment has shifted rapidly in recent days as signs emerged that the waterway could gradually return to normal operations. Reports indicate that shipping activity has resumed in phases following an interim understanding between Washington and Tehran, easing fears of a prolonged supply shock.

Market analysts say the recent price slump reflects a combination of improved supply expectations and weakening demand signals in key consuming regions. Increased output from producers outside the Middle East, alongside the potential return of Iranian crude exports, has added downward pressure on prices.

A key factor behind the decline is the expectation that Iranian oil exports could rise again if sanctions are eased or enforcement is relaxed under diplomatic arrangements. Traders believe this could add significant barrels back into global markets, contributing to oversupply conditions if demand does not strengthen at the same pace.

At the same time, demand trends in major economies have been mixed. Slower industrial activity in parts of Asia and cautious fuel consumption in Europe have also weighed on sentiment, limiting upward momentum in prices despite earlier fears of shortages.

The recent price drop has been welcomed by oil-importing countries, as lower crude prices typically translate into reduced fuel costs for consumers and businesses. In several markets, petrol and diesel prices have already begun to ease slightly, offering relief after months of inflationary pressure driven in part by energy costs.

The agreement initiates a 60-day negotiation period during which Iran will allow toll-free passage through the Strait of Hormuz, one of the world’s most critical oil and gas shipping routes. The deal also envisages restoring traffic through the waterway to full capacity within 30 days.

Analysts expect a gradual recovery in oil flows through the Strait of Hormuz, although industry experts caution that prices may not collapse significantly as global demand remains resilient and inventories require replenishment.

Goldman Sachs projects that Gulf oil exports will return to pre-conflict levels by the end of July, with crude production expected to recover fully by October. The investment bank estimates that normalisation could add about 13 million barrels per day in Hormuz flows, restoring volumes to roughly 70 per cent of pre-war levels.

Despite the recent decline, BNP Paribas said it does not expect oil prices to return to pre-conflict levels. The bank sees $75 per barrel as a “durable floor for the foreseeable future,” citing persistent supply constraints and firm demand.

Energy analysts, however, caution that the situation remains fragile. While prices are currently trending downward, they warn that any renewed escalation between the US and Iran—or disruptions to shipping in the Gulf—could quickly reverse the trend.

Some market observers also point out that volatility is likely to remain high in the coming weeks, as traders continue to assess the durability of diplomatic progress and the pace at which oil flows fully normalize through the Strait of Hormuz.

According to recent market assessments, crude futures have now fallen to levels not seen since the early phase of the conflict, erasing much of the war-related “risk premium” that had previously pushed prices upward. That premium had reflected fears of supply shortages, shipping disruptions, and broader regional instability.

Now, with negotiations ongoing and partial stabilization in the region, that premium is gradually being unwound.

Despite the downturn, oil markets remain sensitive to headlines. Even small shifts in diplomatic talks or security incidents in the Middle East have been shown to trigger rapid price swings, highlighting how closely global energy markets remain tied to geopolitical developments.

Looking ahead, analysts say the key drivers of oil prices will include the pace of Iranian export recovery, global demand growth, and production decisions from major oil-producing nations. If supply continues to rise while demand stays weak, further downward pressure on prices could follow.

For now, the slump marks a significant turning point from earlier months of volatility, when fears of escalation drove sharp spikes in crude prices. The latest move suggests that markets are beginning to bet more heavily on stability and supply normalization—at least in the short term.