Oil price falls back to pre-Iran war levels

Oil price falls back to pre Iran – Following the easing of tensions in the Strait of Hormuz, global oil prices have retreated to levels last observed prior to the Iran conflict. The critical waterway, which serves as a vital artery for energy exports, has seen a gradual return to normal operations, allowing crude oil to stabilize near its pre-war benchmark. Brent crude, the international standard for oil pricing, dipped below $72.48 per barrel—its price on the day before the US and Israel initiated attacks on Iran on 28 February—before rebounding slightly to $72.63. This fluctuation marks a significant shift from the heightened volatility that followed Iran’s blockade of the strait in response to the strikes.

Strait of Hormuz sees renewed activity

The resumption of shipping through the Strait of Hormuz has been a key factor in the oil market’s recent trend. According to maritime intelligence firm Kpler, the number of vessels transiting the waterway has increased substantially since the signing of a Memorandum of Understanding (MOU) between the US and Iran on 17 June. The agreement, which established a 60-day period for nuclear talks and other measures to end the conflict, has facilitated a safer environment for commercial traffic.

Recent days have witnessed a variety of ships passing through the strait, including those carrying crude oil, liquefied natural gas (LNG), fertiliser, and other goods. Kpler reported this diversification of traffic to the BBC, highlighting the growing confidence in the region’s stability. The US and Iran also established a “communication line” to prevent misunderstandings, as stated by mediators Qatar and Pakistan in a joint statement. This initiative aims to ensure the safe passage of vessels through the strait, which has been a focal point of geopolitical tensions.

Peace talks and sanctions relief

Representatives from the US and Iran met in Switzerland last weekend as part of efforts to resolve the conflict. The talks led to the US partially lifting sanctions on Iranian oil exports, a move that has contributed to the gradual recovery of oil prices. However, the current volume of traffic remains lower than pre-war levels, when over 100 ships traversed the strait daily. As of Monday, Marisks, a maritime risk advisory firm, estimated approximately 80 ships had crossed the waterway since the initial peace discussions began.

While the northern passageway of the strait is now open to a limited number of vessels with Iranian approval, the southern route has been designated as a safer alternative by the US navy. This route, free from mines and other obstacles, has been a critical pathway for ships avoiding the conflict zones. Nonetheless, many vessels continue to wait in the Gulf, signaling that the full restoration of pre-war shipping volumes has not yet occurred.

Impact on fuel prices and public scrutiny

The recent stabilization of oil prices has begun to influence fuel costs, though the effects are still being felt. In the US, regular gasoline prices have dropped to around $3.93 per gallon after peaking at $4 in April, the highest since 2022. Despite this decline, the prices remain above those seen before the conflict. This discrepancy has drawn criticism from US President Donald Trump, who accused major energy companies such as Shell and ExxonMobil of “gouging” drivers by not passing on the savings from lower oil costs.

“Oil prices have come down so much and we are not seeing anything at the pump by comparison the way they should be,” Trump stated during a press briefing in the Oval Office.

The American Petroleum Institute, representing the oil and gas industry, noted that fuel prices do not always mirror crude oil fluctuations. This perspective underscores the complex factors affecting retail prices, such as refining costs and distribution expenses. In the UK, similar concerns have been raised by consumers, who have questioned why petrol prices have not dropped as sharply as oil costs. However, the competition watchdog clarified last month that there is no widespread evidence of price manipulation, with average profit margins remaining “broadly unchanged” between February and March.

Broader implications of the peace deal

The recent agreement between the US and Iran carries broader economic implications, particularly for consumers and global markets. Analysts suggest that the deal could lead to lower energy costs, easing pressure on households and businesses reliant on fuel. However, the sustainability of this outcome depends on the continued stability of the region and the effectiveness of the communication line established by Qatar and Pakistan.

As the situation evolves, the focus remains on how quickly oil prices can stabilize and how this will translate to lower fuel costs. The return of normal shipping operations is a positive sign, but the full impact of the peace deal will take time to materialize. For now, the oil market is showing signs of recovery, though the road to sustained normalcy is still ongoing.