Global oil prices extended their decline on Thursday after the United States and Iran signed an interim agreement designed to reduce regional tensions, reopen the Strait of Hormuz and pave the way for increased Iranian oil exports.
The development strengthened expectations of a larger global oil supply, prompting traders to sell crude futures for a second consecutive day.
International benchmark Brent crude dropped by more than 2 per cent to $77.87 per barrel in early trading, adding to losses recorded earlier in the week following reports of progress in negotiations between Washington and Tehran.
Why Oil Markets Reacted
Energy markets responded quickly to the agreement because Iran remains one of the world’s major oil producers.
Under the reported arrangement, Iran is expected to reopen the Strait of Hormuz, a strategic maritime route through which a significant share of global oil shipments passes.
In exchange, the United States is expected to ease restrictions on Iranian oil exports and relax some maritime-related sanctions.
Analysts say the prospect of additional Iranian crude entering international markets has eased concerns about supply shortages, contributing to the drop in oil prices.
Agreement Signed After High-Level Talks
The memorandum of understanding was reportedly signed following discussions involving U.S. President Donald Trump and Iranian representatives during meetings held alongside the G7 Summit.
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