Oil Falls Below $78 as Reopened Hormuz Drains the War Premium

The most important number in global markets this week is the price of a barrel of oil, and it is falling. Brent crude dropped below $78 on Thursday, back to early-March levels, as traders removed the risk premium that had built up after Iran's Revolutionary Guard closed the Strait of Hormuz to United States and Israeli-allied shipping in March. During that closure, Brent had reached roughly $118 to $120 a barrel.

The reversal followed a framework agreement signed this week by United States President Donald Trump, Vice President JD Vance and Iran's parliamentary speaker, which provides for the immediate reopening of the strait and the lifting of the American maritime blockade. The Hindu reported that 25 commercial vessels crossed the newly reopened strait on June 18, the highest single-day figure since mid-April. A full return of flows would let Saudi Arabia, the United Arab Emirates and Iraq restart millions of barrels of halted output.

The ceasefire is not yet secure. The New York Times reported that Israel and Hezbollah carried out new strikes against each other in southern Lebanon while Switzerland postponed a round of United States-Iran talks. The Financial Times argued that a durable nuclear settlement will be harder to reach than the 2015 accord, because Tehran has become less willing to compromise and trust has eroded. For now, the energy market is pricing the ceasefire as real.