Oil prices have tumbled following the announcement of a peace deal between the US and Iran.
With the Strait of Hormuz set to reopen, prices dropped immediately after the news broke. In early Asian trading, prices fell after president Donald Trump declared that ‘oil will flow’.
Brent crude, the global oil benchmark, was 3.8 per cent lower at $84.02 (£62.48) a barrel, while US-traded oil was down 4.1 per cent at $81.40.
Pakistan confirmed that the agreement will be formally signed on Friday in Switzerland.
The precise details of the deal are yet to be confirmed by either nation, though Iranian state media has outlined the draft of a 14-point memorandum of understanding.
View 3 ImagesU.S. President Donald Trump shakes hands with U.S. Vice President JD Vance(Image: Getty Images)
This includes the lifting of the US naval blockade within 30 days and the reopening of the Strait of Hormuz within 30 days “under Iranian arrangements”.
The strait had been effectively closed since shortly after the US and Israel launched airstrikes on Iran on February, 28.
The strait is responsible for the transportation of roughly 20 per cent of the world’s oil and gas supplies.
In the wake of the deal being struck, Trump took to Truth Social to make several posts.
He boasted of succeeding where other world leaders had failed, once again stressing that ‘oil will flow’ across the globe once more.
His post reads: “This Great Deal will bring Peace and Security to the whole Region.
“Many presidents have tried to make Peace with Iran, and all have failed before me. The Leaders of the Region have, for the first time, found a President who can help them achieve real Peace.
“With the opening of the Strait upon the signing of the Deal on Friday, for purposes of mine removal, oil will flow on both ends again for the Region, and the World!”.
View 3 ImagesA small motorboat passes anchored vessels in the Strait of Hormuz off Bandar Abbas, Iran(Image: AP Photo/Amirhosein Khorgooi)
Speaking to the New York Times on Sunday afternoon, the US president confirmed that the agreement with Iran guarantees the Strait of Hormuz will remain “permanently toll free”.
Throughout the conflict, petrol prices have continued to climb, fluctuating since February.
In May, the average price of unleaded petrol rose to 158.52p a litre, according to the RAC.
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Despite the agreement being reached, investment bank JP Morgan had previously forecast that global oil prices are likely to remain in the “low $100s” for much of this year, even if the Strait of Hormuz reopens.
It is expected that oil supplies in the region will take some time to return to normal levels.