Crude oil prices have declined about 5% in the past 24 hours and dropped below $90 U.S. a barrel on reports that the U.S. and Iran have reached a deal to reopen the Strait of Hormuz.
Iranian state media confirmed comments made by U.S. President Donald Trump that a peace deal has been reached that will see the Strait of Hormuz reopened to commercial ships.
U.S. crude oil prices declined as much as 5% to $83.80 U.S. a barrel on the news. Brent crude oil, the international benchmark, also fell 5% to $86.45 U.S. per barrel.
The peace deal reportedly includes a commitment from Iran to reopen the Strait of Hormuz within 30 days while the U.S. would lift oil sanctions on the country.
Additionally, all U.S. military forces would retreat from Iran, and the U.S. and its allies will facilitate reconstruction plans for Iran that cost up to $300 billion U.S.
Trump said on June 11 that the U.S. had “made a great settlement of the war with Iran.”
The president added that the peace deal will be signed “over the next few days.”
Trump also said that he had called off a new round of U.S. military strikes on Iran, arguing that negotiations with Tehran “have been approved.”
Energy analysts and traders have been calling for the reopening of the Strait of Hormuz near Iran, where 20% of the world’s oil is shipped, warning that its prolonged closure would have devastating impacts on crude prices.
The deal with Iran comes days after data showed that U.S. inflation rose to an annualized 4.25% in May, its highest level in three years.
The inflation spike in America was driven almost entirely by a 23% year-over-year increase in energy prices due to the Iran war.
Gasoline price at the pumps in America had risen nearly 40% since the U.S. attacked Iran on Feb. 28.
