Oil prices set for steepest monthly fall since 2020 amid Iran truce

Oil prices extended losses on Friday and were on track for their steepest monthly decline since 2020 as reports of a possible US‑Iran truce eased some supply fears. Market participants said hopes the Hürmüz Strait could reopen helped drive the rapid re-pricing of risk in energy markets.

Trading desks reported Brent futures near $92 a barrel and WTI around $87, reflecting roughly a 19% decline in Brent since the end of April. The move followed news that Washington and Tehran were discussing an extension of a ceasefire and measures that could allow shipping through the Strait of Hormuz to resume, a development that would materially affect global crude flows.

The pullback in oil weighed on energy sector risk premia and supported broader equity markets, which rallied on improving risk sentiment. Despite the drop, inventories reported by the U.S. Energy Information Administration remain under pressure and physical supply constraints persist, suggesting any price relief may be gradual rather than immediate.

In a wider context, the months-long disruption to shipments through the strategic waterway represented one of the largest supply shocks in recent history; even so, the market is increasingly sensitive to diplomatic progress. Lower energy costs would help ease headline inflation pressures in some regions, but central banks remain watchful given the potential for renewed volatility.

Analysts caution that while a ceasefire and partial reopening of shipping lanes could push prices lower in coming weeks, restoring pre-crisis flows will take time due to logistical and infrastructure challenges. Traders are likely to remain reactive to news on negotiations, OPEC+ output decisions and weekly stock data as determinants of near-term direction.