Oil prices continued their sharp decline on Thursday, with U.S. benchmark West Texas Intermediate (WTI) falling below $74 per barrel and reaching its lowest level in more than three months. The move extends a dramatic selloff that has erased much of the geopolitical risk premium that was built into energy markets during the conflict between the United States and Iran. WTI briefly touched $73.36, putting crude on track for one of its worst weekly performances of the year.
The decline comes as investors increasingly price in the possibility of a lasting diplomatic agreement between Washington and Tehran. Recent reports indicate that the two countries have reached an interim framework aimed at ending hostilities, reopening the Strait of Hormuz, and gradually restoring Iranian oil exports to global markets. The Strait of Hormuz is one of the world’s most important energy chokepoints, handling a significant share of global crude shipments. As concerns over supply disruptions fade, traders have rapidly reduced their bullish bets on oil.
Just a few months ago, fears of a broader regional conflict sent oil prices soaring. During the peak of the crisis, traders worried that prolonged disruptions in the Persian Gulf could remove millions of barrels per day from global supply. Those concerns have now largely reversed. Market participants expect shipping traffic through Hormuz to normalize in the coming weeks, while sanctions relief could eventually allow Iran to increase exports and add further supply to the market.
The latest selloff means oil is now within roughly $7 of the levels seen before the outbreak of the U.S.-Iran conflict. Analysts note that much of the wartime premium has already disappeared, though uncertainty remains regarding the final terms of any long-term agreement. Several investment banks have lowered their oil price forecasts, citing improved supply prospects and weaker demand growth from major economies, including China.
Lower oil prices could provide relief for consumers and businesses by reducing fuel and transportation costs, while also helping ease inflation pressures that have concerned central banks worldwide. However, energy producers and oil-exporting nations may face increasing pressure if crude continues its downward trajectory. Investors will now closely monitor negotiations between the U.S. and Iran, as well as any response from OPEC+ producers seeking to stabilize the market.
