• Oil prices fell sharply as a US-Iran peace agreement was announced.
• Brent crude dropped to $84 a barrel, while US crude fell to $81.
• The Strait of Hormuz, a key oil shipping route, will be reopened.
• The deal involved negotiations mediated by Pakistan.
• Analysts predict it may take months for oil supplies to stabilize.

Oil prices experienced a steep decline after US President Donald Trump announced a peace deal with Iran, declaring the "immediate toll-free reopening of the Strait of Hormuz", essential for global energy supplies. Brent crude fell by 3.9% to $84 per barrel, while US crude dropped 4.8% to around $81. This decline extends losses from the previous week when prices decreased by over 3% as the conflict escalated, with analysts previously warning that continued closure of the Strait could push prices much higher, potentially affecting petrol prices in the United States, according to Indiatimes and BBC.

The peace agreement, mediated by Pakistan's Prime Minister Shehbaz Sharif, reportedly includes an end to military operations between the US and Iran. Sharif announced that both nations would sign an official agreement in Switzerland on June 19, leading to the reopening of this critical maritime route, which has been effectively blocked since late February due to the conflict. Trump’s statement claimed, “The Deal with the Islamic Republic of Iran is now complete,” stressing that “oil will flow,” according to BBC and NPR.

The swift price drop in oil futures reflects market reactions to Trump's announcement, with Brent crude now lower than $84 per barrel for the first time since the conflict began, according to multiple sources. As the Strait of Hormuz is a crucial artery, allowing approximately 20% of the world's energy supply to transit, the recent declarations signal potential easing of supply shocks that have contributed to soaring prices during the war. However, experts caution that full restoration of oil flow to pre-war levels may take substantial time due to existing damage from the conflict and logistical challenges, as highlighted by Bangkok Post and NPR.

Industry analysts note that while the geopolitical risk premium built into oil prices has begun to unravel, uncertainties remain regarding how quickly oil production and exports can resume in the Middle East. Given that many oil and natural gas production fields were affected during the conflict, a full recovery—where oil flows through the Strait of Hormuz reach only 60-70% of pre-war levels—could still preserve pressure on prices, as stated by analysts from Commonwealth Bank of Australia and corroborated by Bangkok Post and Indiatimes.