Oil prices have fallen to just over US80/bbl, their lowest level since April, and stocks risen following President Donald Trump’s announcement that Washington and Iran have reached an agreement to end the war
A formal signing of the agreement is due to take place on Friday 19 June in Switzerland.
While the text of the agreement has not yet been released and the details are still unclear, Trump said that hostilities have ceased, the Strait of Hormuz will fully open on 19 June toll-free, and the US blockade will be lifted, although how the Strait will be controlled is not clear.
“Ships of the World, start your engines. Let the oil flow!” Trump said on his social media account, Truth Social.
Iran’s deputy foreign minister, Kazem Gharibabadi confirmed, “A permanent and immediate end to the war has been declared on all fronts.”
The agreement would extend the ceasefire for 60 days to allow negotiations to begin about Iran’s nuclear programme, and lead to a final peace agreement. Plenty of thorny issues remain to be resolved, however which could potentially scupper the deal and lead to renewed conflict.
Claudio Galimberti, chief economist, Rystad Energy commented, “This deal, if it holds, is the most workable outcome available to all parties at the table, which gives it a degree of credibility. Washington has an incentive to avoid a spike in gasoline prices ahead of the midterms, while Tehran is seeking sanctions relief and restored export revenues, and the global economy has a strong interest in keeping the Strait of Hormuz open.”
However the sequencing dispute, with both sides insisting the other must move first, remains the main barrier, while Lebanon continues to represent a wildcard that neither Washington nor Tehran fully controls, he notes. While a credible reopening of the Strait of Hormuz would be one of the most important developments for the global economy, a return to normalised market conditions immediately upon signature in Switzerland would look optimistic.
“It will take time for production to ramp back up, for logistics to normalise, and for the risk premium embedded in crude prices to dissipate, particularly given that the structural shift implied by the UAE’s exit from OPEC+ is not reversed by any near-term diplomatic outcome.
“If the deal holds, it will therefore represent a step in the right direction, and an important one at that, but still a step rather than a destination.”
Even if the agreement holds, it is likely to take some time for traffic through the Strait to return to pre-war levels, with marine insurance rates remaining at a high level, mines needing to be cleared, and tankers needing to be repositioned.
Restarting oil production and getting all the elements of the logistics and supply chain in place could take months.
Total pre-conflict supply across the six Gulf producers stood at 24.2mn bpd in January 2026; current output has fallen to 12.4 million bpd, Rystad notes. Saudi Arabia accounts for the largest single share of lost barrels at 3.8mn bpd, followed by Iraq at 2.8mn bpd and Kuwait at 2mn bpd.
Energy consultancy Wood Mackenzie's view is that if the negotiations continue to make progress, and the Strait of Hormuz is reopened within a few weeks, oil supply from the strongest producers in the Gulf region can be restored relatively quickly, with shipping and logistics likely to be the bottleneck in the early phases of the recovery, rather than upstream producers.Countries with more complex assets, particularly Iraq, will take longer to recover, but could still return close to pre-war levels in six to nine months.
Ed Crooks, vice chair Americas at Wood Mackenzie, says that while Interest in coal, renewables and nuclear power has grown, as has the focus on hydrocarbon assets outside the Middle East, particularly in the Americas, the structural advantages of the Gulf producers as sources of low-cost oil and gas have not changed.
"When exports can flow freely from the region again, they will be highly competitive in world markets," he said.
Oil prices fall on announcement of peace agreement
