Global crude oil prices dropped to a three-month low after U.S. President Donald Trump announced that a peace agreement with Iran was close to completion, raising hopes of a full reopening of the strategically important Strait of Hormuz. The development has boosted expectations of improved global energy supplies and lower fuel costs, particularly for major oil-importing nations such as India.
Following Trump’s remarks, Brent crude briefly fell below $85 per barrel before recovering to around $87.50. Prior to the conflict that began in late February, oil prices were trading near $70 per barrel. Markets responded positively to the prospect of reduced geopolitical tensions and the restoration of normal oil flows through the Strait of Hormuz, a key route for global energy trade.
For India, a lasting peace agreement could bring significant economic benefits. The country relies heavily on imported crude oil, and disruptions in the Strait had contributed to rising fuel costs and inflationary pressures. Since mid-May, state-owned fuel retailers have increased petrol and diesel prices multiple times to offset higher import costs. A normalization of oil supplies could ease pressure on fuel prices, lower transportation costs, support the rupee, and help contain inflation.
According to reports, negotiators have finalized the broad framework of a U.S.-Iran agreement, with both sides expecting a formal signing within days. The proposed deal reportedly includes the reopening of the Strait of Hormuz and steps toward resolving concerns surrounding Iran’s nuclear programme.
Despite the optimism, analysts remain cautious. Previous negotiations have collapsed at advanced stages, and conflicting reports regarding the terms of the agreement have raised uncertainty. Experts warn that if the deal fails and oil flows through the Strait do not return to normal, crude prices could surge to between $120 and $130 per barrel later this year.
For now, global markets are closely watching diplomatic developments, with energy prices increasingly tied to the outcome of the proposed U.S.-Iran agreement.
