The signing of a landmark preliminary agreement between the United States and Iran has brought a tentative end to the 106-day global energy crisis, triggering a sharp retreat in global oil benchmarks. The “Islamabad Memorandum of Understanding,” finalised this week, establishes a 60-day ceasefire and a framework for the gradual restoration of maritime traffic through the Strait of Hormuz.
Market reaction to the diplomatic breakthrough was immediate, with Brent crude futures sliding below the $80-per-barrel threshold on Tuesday for the first time since the war’s initial stages in March. By Thursday, the international benchmark remained near $77.60, while West Texas Intermediate hovered around $74.60. The refined products sector experienced even more dramatic volatility; international market price assessments for North-West European jet fuel plunged nearly 50% from April peaks to reach $957 per tonne. In the United States, consumer relief began to manifest as average retail gasoline prices dipped below $4 per gallon for the first time in months, though prices remain roughly $1 higher than pre-war levels.
The centrepiece of the week was the electronic signing of the 14-point memorandum by President Donald Trump and President Masoud Pezeshkian, an event that formally initiated the removal of the U.S. naval blockade on Iranian ports. Under the terms of the accord, Tehran has committed to best efforts for the safe passage of commercial vessels through the Strait of Hormuz, though logistics experts warn that the complete removal of naval mines could take up to seven weeks. To incentivise compliance, the U.S. Treasury Department issued immediate sanctions waivers for the export of Iranian crude oil and petroleum products, facilitating the departure of the first supertankers carrying a combined 3.8 million barrels from the Gulf of Oman on Tuesday.
While Middle Eastern tensions ebbed, the geopolitical risk profile shifted toward Eastern Europe as Ukraine launched its largest drone assault on Moscow to date on June 18. Nearly 200 drones targeted the Russian capital, striking the Moscow Refinery in Kapotnya and causing significant damage to fuel production capacity that has already led to rationing at domestic petrol stations. Simultaneously, G7 leaders meeting in Évian-les-Bains utilised the falling global energy prices as a window to intensify economic pressure on Moscow, pledging new sanctions against Russia’s shadow fleet of over 600 tankers used to circumvent existing export caps.
Long-term market projections have undergone a fundamental recalibration, with focus shifting from scarcity to a looming structural surplus. In its monthly report released on June 17, the International Energy Agency predicted a “significant overhang” of crude by 2027, as global production is set to surge by 8 million barrels per day against a relatively modest demand growth of just 2 million barrels per day. Financial institutions have echoed this bearish sentiment, with Goldman Sachs cutting its fourth-quarter Brent forecast to $80 a barrel, while Morgan Stanley anticipates an average price of $75 a barrel in 2027.
The sustainability of the current price relief remains contingent on the ability of Washington and Tehran to convert their fragile truce into a durable settlement over the next 60 days. Significant friction persists regarding Iran’s proposal to charge “maritime service fees” for passage through the Strait of Hormuz — a move shipping giants like Maersk have characterised as a dangerous precedent that could permanently alter international maritime law. As the world seeks to rebuild depleted strategic reserves, currently at 43-year lows in the United States, the energy landscape is entering a period of profound adaptation defined by shifting trade corridors and a reinforced global emphasis on energy security.