Oil prices dropped below US$80 a barrel on Tuesday for the first time since the Middle East war broke out in February, with the slide accelerating after The Wall Street Journal reported that Washington could lift sanctions on Iranian crude as part of the deal to end the conflict.

International benchmark Brent North Sea crude ended at US$78.96 a barrel, down 5.1% on the day. The main US contract, West Texas Intermediate, fell 5.8% to US$76.05. The drop extends the slide from last Sunday’s tumble to US$83.96, when Trump first announced the US–Iran deal was complete.

Markets had been buoyed earlier in the session by optimism over the promised reopening of the Strait of Hormuz, with Iranian state media reporting that three oil tankers and two cargo ships had already passed through the strait. Tehran had blockaded the chokepoint after the United States and Israel launched strikes against Iran on February 28; Washington then halted shipping to and from Iranian ports as part of the naval blockade that ran for more than three months.

The WSJ report added a new dimension. If the US Treasury issues a sanctions waiver allowing Tehran to immediately sell crude and refined products, the global supply pool would expand at the same time the Hormuz risk premium evaporates — a two-sided easing markets had not fully priced. “Although the deal has not been formally signed, there already appears to be a peace dividend for markets,” Kathleen Brooks, research director at trading group XTB, told Agence France-Presse via Ada Derana.

Oil industry experts and shipping companies have cautioned that the restoration of normal Hormuz operations will take time, and analysts warned market conditions could remain tight for weeks or months even after the conflict formally ends. For Sri Lanka, where the Ceylon Petroleum Corporation said in May it would not cut prices at the June review and where the monthly fuel bill hit US$886 million in April, the move below US$80 brings the cost of imported crude back toward pre-war levels for the first time this cycle and could open space for a downward fuel-price revision at the next CPC review.

Wall Street stocks had a mixed day on the news. The Dow rose to a second consecutive record close while the S&P 500 and Nasdaq retreated, with Briefing.com analyst Patrick O’Hare describing the moves as a rotation rather than a mass exit from equities. European markets closed higher, while Asia ended mixed.

Source: Oil drops below US$80 on US-Iran deal — Ada Derana, June 17.