The rebound followed a sharp selloff on Monday, when oil prices tumbled nearly 5% to their lowest closing level since March 4. The decline came after U.S. President Donald Trump announced that a memorandum of understanding had been agreed to end the U.S.-Israeli war with Iran.
Crude oil price on June 16
Brent crude futures rose 26 cents, or 0.3%, to $83.42 a barrel, while U.S. West Texas Intermediate crude gained 46 cents, or 0.3%, to $81.12 a barrel as of 0108 GMT.
The conflict had led to the closure of the Strait of Hormuz, a key shipping route that normally handles around one-fifth of global oil supply, and resulted in roughly 14 million barrels per day of production being shut in.
However, market optimism has been tempered by the absence of publicly available details of the agreement and the fact that a permanent truce has yet to be negotiated. Initial indications suggest the memorandum could pave the way for reopening the Strait of Hormuz and extending a ceasefire for 60 days, giving negotiators time to address more complex issues, including the future of Iran’s nuclear programme.
Iranian President Masoud Pezeshkian on Monday described the U.S.-Iran memorandum of understanding as an “important step” toward ending the fighting, but said a final agreement to secure a lasting ceasefire had yet to emerge.
Where are prices headed?
Per experts, global oil inventories have been drawn down during the prolonged closure of the Strait of Hormuz and will require time to recover. The stockpiles are likely to decline further before fresh supplies from the Gulf begin reaching the market.
Market participants are now closely monitoring how quickly producers in the Middle East can restore oil output and exports after wartime disruptions. Investors are also watching whether shipping traffic gradually returns to the region.
Analysts cautioned that even if the ceasefire holds, shipping through the Strait of Hormuz may take months to normalize. They added that any damage to energy infrastructure could further delay the recovery process.Last month, Saudi Aramco Chief Executive Officer Amin Nasser warned that disruptions in the Strait of Hormuz could postpone stability in global oil markets until 2027. He said prolonged interruptions could affect nearly 100 million barrels of oil supply every week. Saudi Aramco remains the world’s largest oil producer.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
