Brent crude slipped to about $83 a barrel on Tuesday after a sharper fall at the start of the week, while West Texas Intermediate traded near $81. The decline followed confirmation that Washington and Tehran had approved a memorandum intended to extend a 60-day ceasefire, reopen the blocked waterway in phases and create a negotiating track on nuclear and sanctions issues.
The draft arrangement marks the most substantial diplomatic move since the Gulf conflict shut down tanker traffic through the Strait of Hormuz, the narrow channel between Iran and Oman that normally carries close to one-fifth of the world’s oil supply. Its closure had lifted crude above $100 a barrel, disrupted liquefied natural gas cargoes from Qatar and forced major importers in Asia to draw on inventories and emergency supply arrangements.
The Geneva signing is expected to formalise an initial peace accord rather than settle every dispute. The first phase is built around a halt to military operations, a timetable for maritime clearance and the withdrawal of restrictions on commercial vessels. A second phase is expected to focus on Iran’s nuclear programme, including the future of enriched uranium held at or linked to facilities damaged during the conflict.
The uranium question remains the most sensitive element of the accord. International monitors have estimated that Iran held more than 400kg of uranium enriched to 60 per cent, a level below weapons grade but far above the threshold used for civilian power generation. Agency documents have also shown gaps in access to affected facilities and uncertainty over the exact condition and location of some nuclear material after strikes on Fordow, Natanz and Isfahan.
Under the emerging formula, the stockpile would be destroyed, diluted or otherwise rendered unusable for weapons-related purposes under international supervision. The technical annex is expected to define whether the material is removed, blended down inside Iran, converted into another form or held under sealed monitoring until final disposal. That detail will determine whether the accord is seen as a durable non-proliferation step or a short ceasefire mechanism with unresolved nuclear risk.
US President Donald Trump has presented the memorandum as a pathway to restore trade flows and lower energy prices. Iran’s President Masoud Pezeshkian has described the pact as an important step towards stopping the fighting, while signalling that a lasting truce still depends on the final terms. Tehran is expected to seek phased sanctions relief, access to oil revenues and guarantees against renewed military action.
Markets moved quickly because even a partial reopening of Hormuz changes the near-term supply outlook. Before the conflict, roughly 20 million barrels per day of oil moved through the strait. China, India, Japan and South Korea were among the largest destination markets for crude passing through the channel, while Qatar’s LNG exports also depended heavily on the route.
Energy analysts warned that prices may remain volatile even after a signing ceremony. Tanker traffic cannot resume instantly while mines, damaged port facilities, insurance restrictions and naval coordination remain active concerns. Some banks expect flows to rebuild over several weeks, with a larger recovery later in the year if the ceasefire holds and commercial insurers restore cover for Gulf routes.
The sharp fall in oil also reflected weaker physical demand. China’s crude imports have fallen sharply, while higher US exports and softer refinery margins have reduced the immediate pressure on buyers. That has allowed traders to price in a faster easing of the wartime premium, although any delay in the Hormuz reopening could quickly reverse part of the decline.
Saudi Arabia and the UAE have pipeline routes that bypass Hormuz, but those alternatives cannot replace the full volume normally carried by tankers through the strait. Saudi Aramco’s East-West pipeline to the Red Sea and the UAE’s link to Fujairah provide important flexibility, yet spare capacity is limited and unevenly available. Iran’s own Jask route has remained small by comparison.
The accord also carries wider financial implications. Lower crude prices would ease pressure on fuel import bills, airline costs and inflation expectations across oil-consuming economies. Equity markets responded positively to the prospect of reduced energy disruption, while gold and other safe-haven assets remained supported by doubts over implementation.
Gulf governments are expected to press for predictable shipping guarantees before declaring the crisis over. Commercial carriers will need clarity on naval escort rules, port access, sanctions exposure and liability before returning large fleets to the route. A rushed reopening without synchronised security arrangements could leave the market exposed to renewed disruption.
For Tehran, the Geneva accord offers relief from military pressure but carries domestic political risk if nuclear concessions are viewed as excessive. For Washington, the agreement offers a chance to cap a costly conflict and reduce energy-market strain, but failure to verify the uranium provisions would expose the deal to criticism from allies and opponents of engagement with Iran.
Follow Arabian Post
Select Arabian Post as your preferred source on Google and MSN News for trusted business news and Arab politics and updates.
