Oil Prices Decline on Easing Tensions Over Iran-US Ceasefire Extension and Hormuz Disruption Concerns

Global Oil Prices Slip 1% as Iran-US Ceasefire Extension Looms

New Delhi: Global oil prices declined approximately 1% on Friday morning following reports that Iran and the US have agreed to extend their fragile ceasefire, easing immediate supply disruption fears. A 60-day memorandum of understanding (MoU) to extend the ceasefire and open talks on Iran's nuclear program has been reportedly reached by US and Iranian negotiators, although US President Donald Trump has not yet given final approval. Iran has also not confirmed its acceptance.

At 8:40 am, India time, the July Brent contract on the Intercontinental Exchange traded at $92.86 a barrel, down 0.91% from its previous close. The July West Texas Intermediate contract on Nymex fell 1.24% to $87.73 a barrel.

According to reports, the proposed 60-day MoU would state that shipping through the Strait of Hormuz will be "unrestricted" with no tolls and Iran required to remove all mines from the strait within 30 days. Additionally, the US naval blockade would be lifted, but only in proportion to the restoration of commercial shipping.

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The decline in oil prices followed a volatile session a day earlier, when prices jumped after US strikes on Iran targeted a military site in Bandar Abbas, a strategic port city, before easing later in the evening. The strikes took place during the ongoing ceasefire between Tehran and Washington and were described by the US as "self-defense." In response, Iran's Islamic Revolutionary Guard Corps (IRGC) said it targeted an American air base in the region, raising concerns over a possible derailment of ongoing talks.

Markets are closely tracking developments around the Strait of Hormuz, a key chokepoint for roughly a fifth of global oil and liquefied natural gas trade. Any reopening or de-escalation in the area is seen as a major stabilizing factor for prices.

For India, which relies on imports for about 90% of its crude oil needs, the conflict has added pressure to an already import-dependent energy bill. The Indian crude oil basket—comprising Sweet grade (Brent Dated) and Sour grade (Oman & Dubai average) crude imported by domestic refiners—stood at $102.05 per barrel on 26 May.

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The government has said supplies of crude oil, petrol, and diesel remain adequate, although it has acknowledged instances of shortages in some parts of the country, attributing them to panic buying and a shift of bulk industrial consumers to retail fuel outlets. In a statement on Wednesday, the ministry of petroleum and natural gas said industrial consumers, including factories and fleet operators, appear to have found an arbitrage opportunity in the government's consumer-friendly retail fuel pricing, which is intended to benefit households and small users.