Post US-Iran deal, oil markets began cooling down almost immediately. The trajectory was clear. Oil prices fell by almost eight per cent after the US and Iran signed a Memorandum of Understanding (MoU) to end the blockage of the Strait of Hormuz, the waterway through which about a fifth of the world’s oil usually sails to global markets, especially to Asia and Europe.

Brent for August was at $80.57 a barrel, while WTI for July delivery was hovering around $77.54 a barrel as of 1:52 pm in New York on Friday. The more active WTI August was edging up to $76.54 a barrel. Earlier, the prices had dipped even lower, but recovered somewhat once Israel launched new strikes in Lebanon. Consequently, US Vice President J.D. Vance had to defer his scheduled trip to Switzerland to begin the next phase of negotiations with Iran to resolve remaining issues.

Much now depends on how things play out from here and whether the parties involved in the deliberations will be able to reach a final settlement on all issues over the next sixty days. But given the market scenario, the upcoming mid-term elections in the US, the slowing global economy, rising inflation, the tightness of the oil markets, coupled with low crude inventory levels all around, the dire state of the Iranian economy and the growing economic pressure on Tehran, all are exerting pressure on both countries to bring the war theatre to a close. That means the US and Iran are evidently under pressure to ensure that the deal remains intact and ultimately materialises.

In the war theatre, the US and Iran were not the only stakeholders. There were others, too, especially Israel. But as the war progressed, the divergence between the objectives of the allies — the US and Israel — widened. The lack of convergence of interest between the two allies became visible. Time was of the essence, as the US had little time left before the mid-term elections in November.

There has been a structural shift in what Hormuz passage means — commercially, legally and operationally

Further, most analysts believed that if the war continued and the strait remained blocked until the next month, global crude inventories would fall to critical levels. “We haven’t actually reached a point yet where oil has run out, but it was getting dangerously close,” Global News reported, citing economics professor Moshe Lander of Concordia University.

Last week, the US Department of Energy said crude oil stocks in the US Strategic Petroleum Reserve fell to 340.3 million barrels, the lowest level since 1983. That’s less than half the capacity of just over 700m barrels, reported the US Energy Information Administration.

Tightening crude inventories could have led to a real spike in oil prices. A shock of that magnitude would have been catastrophic for global economies, and a recession was bound to follow.

Israel was not on board with this urgency. Its war objectives were far from achieved.

On the other hand, bringing an end to the war on all fronts, including Lebanon, was an integral part of the MoU signed between Iran and the US. Israel’s ongoing conflict with Hezbollah left the ceasefire vulnerable to renewed disruption, undermining the fragile ceasefire and the MoU. Washington was clearly upset.

Yet, Israel continued with the offensive. On Friday, it was reported that Israeli air strikes had resulted in the killing of 47 people in Southern Lebanon, and in response, Hezbollah also reportedly killed four Israeli soldiers. The Iran-US MoU was now in jeopardy. The US intervened, and under intense US pressure, Israel agreed to a ceasefire — bringing some sigh of relief. But whether the ceasefire will hold remains a big if. For the next few days, eyes would remain glued to developments in Lebanon and oil markets would react accordingly.

The path to normalcy in the region, even after the end of the war, was never going to be easy. Susan Bell, senior vice president of downstream research at Rystad Energy in Calgary, had told Bloomberg: “There is going to be some stops and starts in this whole negotiation process… with posturing on both sides over the next 60 days.”

“While the deal is not necessarily dead on arrival, there appear to be real risks to its staying power,” Helima Croft, head of commodity markets strategy at RBC Capital Markets, said in a note. Maritime logistical constraints, congressional opposition, and ongoing Israeli strikes in southern Lebanon pose key threats to the normalisation of oil flows, she added just before the ceasefire between Israel and Hezbollah was announced.

Despite the resolution of the crisis, if any, the war has changed perceptions of the Hormuz passageway. It has brought about ‘a structural shift in what Hormuz passage means — commercially, legally and operationally’, the New York Times said, quoting Ana Subasic, a trade risk analyst at Kpler.

“It has produced a passage environment where vessels may move, but their movements cannot always be trusted, verified or defended; where insurance coverage technically exists but its commercial terms may make transit economically irrational; where sanctions exposure can begin before a payment is made or a contract is signed; and where the most important risk indicators are not what diplomatic channels are saying but how vessels are actually behaving.” These have serious implications for the oil-rich Middle East.

The writer is an energy analyst and has delivered talks at the Department of Energy in Washington and the International Energy Agency. X: @rhusainsyed

Published in Dawn, The Business and Finance Weekly, June 22nd, 2026