Crude Oil Hits Two-Month Low As Trump Cancels Iran Strikes And Signals Imminent Deal

Crude oil prices dropped to their lowest level in two months on Friday after US President Donald Trump said he had called off planned military strikes on Iran following what he described as high-level discussions with Iranian leadership.

On Friday 12 June, Brent crude futures fell $1.21 or 1.3% to $89.17 a barrel, while US West Texas Intermediate (WTI) dropped $1.23 or 1.4% to $86.48. Brent had briefly dipped as low as $88.79 at the open before recovering slightly.

Brent crude extended its losses at the open, declining almost 2% to touch $88.79 per barrel. The benchmark had closed at a two-month low in the previous session.

Trump posted on Truth Social that key points of a proposed agreement had been approved in both concept and detail by all parties involved, naming the United States, Israel, Saudi Arabia, the UAE, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan and Egypt, among others.

Speaking at the Oval Office, he said he expects a formal signing within the next few days. However, an Iranian foreign ministry spokesperson said the deal had not yet been finalised and accused the US of making excessive demands and introducing new conditions into the talks.

Trump added that the naval blockade of Iranian waters would remain in full force until the transaction is finalised.

What Changed This Week

The price drop came after a sharp escalation earlier in the week. Iran announced a complete closure of the Strait of Hormuz on Wednesday, warning that any vessel attempting to pass through would come under fire. The strait typically handles about a fifth of global oil and LNG shipments. Despite the closure, US military officials said commercial vessels continued to transit the waterway.

On Thursday, Trump had threatened to hit Iran hard with fresh strikes and floated the idea of taking control of Kharg Island, one of Iran's main oil export terminals, before reversing course the same evening with his ceasefire announcement.

India In The Crossfire

The escalation has had direct consequences for India. Three vessels carrying Indian crew members were reportedly struck by US forces during the week. US forces on Thursday hit MT Jalveer, a Guinea-Bissau-flagged vessel with 20 Indian crew members on board.

The incident followed a similar attack on another ship carrying Indian sailors. In a separate incident on Monday, three Indian nationals were killed in an attack on the vessel Settebello.

India's Ministry of External Affairs summoned the US chargé d'affaires to register a formal protest over attacks on vessels with Indian crew. A government spokesperson said the attacks were a direct consequence of the ongoing conflict and posed serious concerns for maritime safety.

Where Prices Could Go

Analysts say a ceasefire announcement alone may not bring immediate relief to energy markets. Even if a deal is reached, shipping activity through the Strait of Hormuz could take months to return to normal, and any damage to energy infrastructure would extend the recovery further.

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According to analysts, an extended closure of the strait could disrupt nearly 20 million barrels per day of global crude flows. In such a scenario, oil prices could climb to between $110 and $150 a barrel.

Others note that tightening supply and rapidly falling global oil inventories could push prices toward the upper end of their trading range regardless of the geopolitical outcome.

Sources:

The Economic Times

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