Oil prices slide to US$80 on Middle East peace optimism
Brent crude fell 3.6% Tuesday as a tentative U.S.-Iran deal raises hopes of reopening the Strait of Hormuz by week's end.
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Oil prices pulled back Tuesday as optimism over a tentative United States-Iran peace agreement lifted hopes for reopening global trade routes and ending supply disruptions.
Brent crude, the global benchmark, fell 3.6 per cent to dip below US$80 per barrel for the first time since early March—a sharp retreat from the US$100-plus levels of recent weeks. West Texas Intermediate traded below US$76, while Western Canadian Select fell below US$60.
The price decline reflects expectations that the U.S.-Iran deal will reopen the Strait of Hormuz by week's end, restoring the flow of Middle Eastern oil to global markets after a prolonged conflict. Before the war, WTI traded at US$67; it spiked to over US$120 during the conflict.
Significant obstacles remain in negotiations, particularly around Iran's nuclear program. But Wall Street's betting that the agreement will provide a long-term fix to a conflict that has worsened inflation globally.
The timing matters: the Federal Reserve is meeting Tuesday to decide on interest rates, with an announcement scheduled for Wednesday. The Bank of Canada is expected to announce its next decision after leaving rates unchanged at 2.25 per cent on June 10. Brent crude has fallen sharply from recent peaks, though the energy industry may take months to return to full speed.