Oil Price Drops 5% on Iran Deal, But Recovery Won’t be Easy

Spot Brent crude oil prices dropped over 5% after President Donald Trump indicated a US-Iran agreement might be reached before his China visit. This decline reflects investor expectations of the Strait of Hormuz reopening. However, Rystad Energy warns that a breakthrough alone will not immediately restore normal oil flows. Trump halted the US-led "Project Freedom" escort mission through the Strait of Hormuz, citing progress toward a deal. A potential agreement could involve Iran surrendering enriched uranium and halting parts of its nuclear program. Despite the positive news, Iran's Revolutionary Guard Navy has implemented new protocols requiring prior approval for vessels transiting the strait. Rystad Energy has lowered its 2026 Brent forecast and highlights that physical supply tightness will persist due to elevated tanker rates, security premiums paid by buyers, and the need for insurers to reprice transit risks. Additionally, damaged regional infrastructure requires significant rebuilding costs. Rystad estimates that normalizing physical oil flows could take six to eight weeks after a deal, with full Gulf recovery potentially extending into the third quarter. US gasoline prices have remained high, and demand destruction is already evident.

(Source：BeInCrypto)