Crude oil prices fell further on Thursday after US President Donald Trump and his Iranian counterpart, Masoud Pezeshkian, signed a memorandum of understanding aimed at ending hostilities and restoring the flow of oil through the Strait of Hormuz. The deal, signed at the G7 summit in Évian, is expected to ease supply pressures that have roiled global energy markets for months.
West Texas Intermediate, the US benchmark, dropped 2.3% to $75 a barrel in early trading, while Brent crude, the international gauge, fell 2% to around $78 a barrel. Both remain above the roughly $70 level seen before the conflict but are well below the peaks of more than $100 reached only weeks ago.
The agreement sets a 60-day window for negotiations on a final settlement regarding Iran's nuclear programme. In the interim, Tehran has agreed to dilute its stockpile of highly enriched uranium. Crucially for energy markets, the deal lifts US-backed sanctions, allowing Iran to resume selling its oil freely, and clears the way for tankers to move crude out of the Persian Gulf once more.
Trump stated after signing the memorandum, “oil down, stocks up,” accompanied by hand motions. He also pledged that the Strait of Hormuz would be fully open by Friday and operate without transit charges, a promise that has encouraged traders to bet on easing supply pressures.
Oil Market Under Strain
The optimism arrives against a strained backdrop. In its June Oil Market Report, the International Energy Agency said strategic oil reserves across advanced economies had slipped to their lowest level since 1990, with government stockpiles in OECD countries down by 163 million barrels since the conflict began as emergency releases accelerated. The agency also trimmed its outlook for global demand, which it now expects to contract through 2026 as elevated fuel prices and supply disruptions bite, before recovering next year. It cautioned that any rebound in supply may be gradual, citing the slow clearance of mines and continued disruption to shipping routes even with the interim deal in place. Flows through the Strait of Hormuz had already begun to recover, rising from a May low to around 12 million barrels a day in early June.
Some analysts remain sceptical about the durability of the agreement. A former US general recently noted that only Trump believes the Iran deal will hold, as risks from Israel and Hezbollah continue to rise.
European Stocks Mixed After Fed Signals
Equity markets offered a patchier picture following Wednesday's losses on Wall Street, where the S&P 500 fell 1.2% after fresh Fed projections showed nearly half of policymakers expect at least one interest rate hike this year. The Dow Jones Industrial Average shed 1%, and the Nasdaq Composite slid 1.3%.
In his first press conference as Fed chair, Kevin Warsh declined to forecast where rates would end the year and signalled a rethink of how the central bank communicates, dropping the customary hints about future policy direction from its statement. Trump, who had long pressed Warsh's predecessor to cut rates, was unusually relaxed about the outcome. “It's all right. Whatever,” Trump told reporters in France as he attended the G7 meeting. Asked about the prospect of a hike, he said it was “hard to believe” but that, with Warsh now in place, he was “guided by what he wants.”
US stock futures pointed higher early on Thursday, with contracts on the S&P 500 up 0.9% and on the Nasdaq Composite around 1.4% higher. In Asia, Tokyo's Nikkei 225 and South Korea's Kospi both jumped 2.3%, helped by hopes for an end to the Iran war and strong demand for technology shares.
European trading was more subdued. The Euro Stoxx 50 rose 1%, but the broader pan-European Stoxx 600 traded flat. The UK's FTSE 100, Germany's DAX 30, Italy's FTSE MIB, Spain's IBEX 35, the Netherlands' AEX, and Switzerland's CH20 all traded between 0.4% and 0.8% higher than their Wednesday close. France's CAC 40 led the pack, jumping roughly 1.3%.
The G7 summit in Évian has also seen other notable interactions, including Meloni and Trump patching up their rift after weeks of tension, and Merz gifting Trump a personalized football jersey.
