REUTERS

Oil prices fell 2 percent on Thursday to their lowest since the first trading day of the Iran war, as a US-Iran interim deal to end the war, reopen the Strait of Hormuz and ease sanctions on Tehran boosted the global supply outlook. Brent crude futures were down $1.59, or 2 percent, at $77.96 a barrel as of 0811 GMT, while US West Texas Intermediate fell $1.83, or 2.38 percent, to $74.96 a barrel.

Brent sank to its lowest since March 2, which was the first day of trading after the initial US-Israeli strikes on Iran, while WTI was at its lowest since March 4.

“The sell-off extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent US-Iran memorandum of understanding,” IG market analyst Tony Sycamore said in a note.

The 14-point memorandum begins a 60-day negotiation period during which Iran will allow toll-free passage through the Strait of Hormuz, a key oil and gas shipping lane. The deal calls for traffic through the strait to be restored to its full capacity within 30 days.

The preliminary accord defers many of the more difficult issues, such as Iran’s nuclear program, and also requires the US and its partners to come up with a $300 billion plan to finance Iran’s recovery.

Analysts expect a gradual recovery in flows through the Strait of Hormuz, while industry experts have cautioned that prices may not plummet as demand recovers and inventories are refilled.

Investment bank Goldman Sachs expects Gulf exports to normalize to pre-war levels by end-July, with crude production recovering by October.