Oil prices traded slightly lower on Wednesday as investors continued to evaluate the implications of the emerging U.S.-Iran peace agreement, while lingering uncertainty over shipping activity through the Strait of Hormuz prevented a deeper sell-off.
By 06:30 GMT, Brent crude futures were down 15 cents at $78.81 per barrel, while U.S. West Texas Intermediate crude slipped 12 cents to $75.93 per barrel.
Crude Extends Retreat After Sharp Two-Day Decline
Both benchmark contracts had already fallen around 5% in each of the previous two sessions, reaching their lowest levels in three months.
The decline has been driven largely by expectations that the agreement between Washington and Tehran could pave the way for a resumption of energy flows through the Strait of Hormuz, one of the world’s most important oil transit routes.
Priyanka Sachdeva, senior market analyst at Phillip Nova, said: “Markets are broadly stripping out the embedded geopolitical risk premium in oil prices.”
She added: “That said, the path toward normalisation remains far from straightforward. While political agreements may be progressing, physical tanker traffic through the Strait has yet to fully recover.”
Shipping Recovery Remains a Key Uncertainty
Under the proposed agreement, the United States would lift its blockade of Iranian ports, while Tehran would allow oil tanker movements through the Strait of Hormuz, which has effectively remained blocked since U.S. and Israeli strikes on February 28.
Despite the improving diplomatic backdrop, traders remain cautious about the speed at which shipping activity can return to normal levels.
Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, noted: “Oil markets retreated on expectations the Strait of Hormuz would reopen following the peace agreement, but traders held off further selling pending details.”
He added that WTI crude is likely to remain volatile within a range of approximately $10 above or below the $80-per-barrel level.
Before the disruption, roughly 20% of global crude oil and liquefied natural gas supplies passed through the Strait of Hormuz.
Details of U.S.-Iran Framework Continue to Emerge
Additional information regarding the interim peace framework surfaced on Tuesday.
President Donald Trump stated that the agreement would prevent Tehran from obtaining a nuclear weapon, while a U.S. official indicated that Iran would be permitted to resume oil exports once the accord is signed.
The memorandum of understanding, which has not yet been released publicly, reportedly extends the fragile ceasefire reached in April by another 60 days, providing additional time for negotiations toward a more permanent settlement.
However, energy industry executives caution that restoring oil production, refining activity and export infrastructure to pre-conflict levels could take weeks, months or even years.
Regional Tensions Still Present
Questions also remain over the durability of the agreement.
Israel has distanced itself from both the April ceasefire and the latest U.S.-Iran arrangement, raising concerns about the long-term stability of the accord.
On Tuesday, Israeli drone strikes reportedly targeted three vehicles in southern Lebanon, killing at least four people and injuring others, according to Lebanon’s National News Agency. The incident prompted a rare public criticism from President Trump.
China Demand and U.S. Inventories Also in Focus
Beyond geopolitical developments, traders are monitoring signs of softer demand from China.
New data showed Chinese crude oil processing volumes fell 9.1% year-on-year in May, dropping to their lowest level in nearly four years. The figures suggest refiners may have begun drawing down inventories during the conflict period.
Meanwhile, the American Petroleum Institute reported that U.S. crude stockpiles fell by 8.3 million barrels during the week ended June 12.
The decline exceeded market expectations for a draw of 4.6 million barrels. Investors are now awaiting official inventory figures from the Energy Information Administration, scheduled for release later on Wednesday.