Oil prices plunge more than 4% after US-Iran agreement paves way for reopening of Hormuz Strait

Oil prices fell more than four percent on Monday after the United States and Iran announced a peace agreement aimed at ending months of conflict that had unsettled global energy markets.

In Tokyo trading, West Texas Intermediate (WTI) crude dropped 4.39 percent to $81.15 per barrel after mediator Pakistan announced that Washington and Tehran had agreed to a peace deal and an “immediate and permanent” cessation of military operations across all fronts, including Lebanon.

US President Donald Trump quickly confirmed the development on Sunday, declaring that “the deal with the Islamic Republic of Iran is now complete.”

Trump also announced the reopening of the strategic Strait of Hormuz, a key maritime passage through which around 20 percent of the world's crude oil supply is transported.

“I hereby fully authorize the toll-free opening of the Strait of Hormuz and, simultaneously, the immediate removal of the United States naval blockade. Ships of the world, start your engines. Let the oil flow!” Trump said.

Shortly afterward, Iran stated that the newly announced agreement with the United States had brought an “immediate end” to the war between the two countries.

However, analysts cautioned that significant challenges remain before a lasting peace is secured.

“This is a first-step deal, not a final peace settlement,” said Stephen Innes of SPI Asset Management.

“The market will now focus on verification,” he added, pointing to the need for a formal signing in Switzerland, mine-clearance efforts, and restraint from Israel.

“It is a ceasefire framework that the market can work with, but it postpones the more difficult issues, including Iranian compliance and maintaining calm from Hezbollah,” Innes said.