Oil falls on interim deal to reopen Hormuz

• Peace pact gives Iran sanctions relief
• US pledges blockade withdrawal
• Iran allows no-charge transit for 60 days

Crude oil prices slid in early Thursday trade after the US and Iran signed an interim agreement to end their more than three-month-long war.

Brent crude futures fell 1.13 percent to $78.42 a barrel as of 02:40 GMT, while US West Texas Intermediate declined 1.72 percent to $75.86 a barrel.

Washington pledged immediately to begin withdrawing its naval blockade of Iranian ships, work with allies on a $300 billion reconstruction fund for Iran, and ultimately lift “all types of sanctions” on the Islamic Republic, according to a 14-point memorandum of understanding as relayed by US officials quoted in the Washington Post.

Pending the immediate and permanent cessation of hostilities between the two parties across the region, including in Lebanon, Iran will allow commercial vessels again to transit the Strait of Hormuz safely “with no charge” for 60 days only.

Iran will then decide on the future administration of the waterway in partnership with Oman, taking into consideration “applicable international law and the sovereign rights of coastal states” across the Gulf, the text says.

Mohammad Bagher Ghalibaf, speaker of Iran’s parliament and the Islamic Republic’s lead negotiator, told state media that his country will start charging fees after the 60 days are over, the New York Times reported.

“The Strait of Hormuz will not return to the conditions before the war,” he said. “Payment for passage services through the Strait of Hormuz has been established in the memorandum of understanding.”

Regardless of details, a sign that shipping through Hormuz is about to resume is that Gulf crude producers have been preparing for such a move, Gregory Brew, senior analyst for Iran and oil at Eurasia Group, wrote in an X post earlier on Wednesday.

“Iraq, Kuwait, UAE and Saudi Arabia have been making moves over the last week suggesting they expect the strait to reopen imminently,” he said.

In the MoU, Iran also committed not to “procure or develop” nuclear weapons, with bilateral discussions on the handling of its stockpile of enriched material to take place over the next two months and beyond.

Implementation of the 14 points will be gradual.

Further reading:

• Shipping industry urges caution on Hormuz reopening
• Robin Mills: Markets should not assume danger has passed
• Gulf seafarers’ PTSD claims raise questions on costs

Certain commitments are triggered by the signing of the MoU, such as US waivers that will enable Iran immediately to sell its oil despite sanctions. Others will be stacked over the next 30 or 60 days as Washington and Tehran debate a final agreement.

US President Donald Trump and his Iranian counterpart, Masoud Pezeshkian, have signed the deal digitally, according to media reports.

Trump said he is prepared to “go back to bombing” if Iran does not comply with the terms.

He also said the $300 billion in reconstruction funds for Iran would not come directly from the US government but rather from oil sales, the unfreezing of blocked Iranian funds and other foreign and private investments.

“If we get to a final deal and if the Iranians behave, we will permit the sanctions relief that would allow, for example, the Emiratis to build a power plant in Iran,” the Financial Times quoted an unidentified US official as saying.

In other markets, spot gold rose 1.5 percent to $4,322.41 per ounce by 01:02 GMT on Thursday after declining nearly 2 percent on Wednesday.

The Dubai stock exchange closed 1 percent higher on Wednesday, supported by Emaar Properties. The Abu Dhabi index gained 0.3 percent.

The Saudi bourse fell 0.3 percent as heavyweights Al Rajhi Bank and Saudi Aramco declined.