Oil prices fall further as Trump signs deal to reopen the Strait of Hormuz.

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Oil prices sink further as Trump signs deal to reopen Hormuz

Oil prices fell again on Thursday after U.S. President Donald Trump and his Iranian counterpart signed a memorandum of understanding to end their conflict and reopen the Strait of Hormuz.

The agreement raised hopes for a lasting peace between the two countries after more than three months of war that had destabilised energy markets and contributed to a recent rise in inflation.

Trading floors, however, were cautious, as markets anticipated that the Federal Reserve might raise interest rates before the end of the year. The Fed’s new chair, Kevin Warsh, acknowledged in his first policy meeting that “persistently high prices are a burden for the American people.”

Trump signed the memorandum in Versailles after the G7 summit, telling reporters: “Just signed it.”

Iranian Foreign Ministry spokesman Esmaeil Baqaei, quoted by the state news agency IRNA, said the document “was finalised with the signatures of the presidents.”

All attention now turns to the Strait of Hormuz, through which about one‑fifth of the world’s oil normally passes. Tehran had effectively closed the strait after the U.S. and Israel launched their war on Iran on February 28.

“As a first step, the Islamic Republic of Iran will instantly reopen the Strait of Hormuz and the United States of America will immediately lift the naval blockade,” Pakistan Prime Minister Shehbaz Sharif, whose officials mediated the agreement, said on X.

The deal commits Washington to immediately waive oil sanctions and facilitate the release of a $300 billion reconstruction fund, while Tehran agrees to dilute its enriched uranium as talks on a longer‑term agreement continue.

Crude prices fell more than one percent on Thursday, extending the losses that began over the weekend. Both main contracts have dropped more than 15 percent since last week, when speculation about an agreement began to circulate.

“A signed MOU and a faster path toward reopening the Strait of Hormuz should pull some of the panic premium out of crude,” wrote Stephen Innes at SPI Asset Management.

“That matters because oil was not just trading war risk. It was trading the possibility that reserve drawdowns and blocked Gulf flows would create an energy cliff.”

Equities were mixed as they struggled to maintain the positive momentum seen earlier in the week, following the Fed’s latest policy meeting that held rates as expected but signalled a possible hike in the next six months.

Tokyo, Seoul, Singapore, Taipei and Manila all rose, but Hong Kong, Shanghai, Sydney, Wellington and Jakarta fell.

The meeting was the first for new chair Kevin Warsh, who noted that inflation has been well above the bank’s two‑percent target for years but pledged to “deliver price stability.”

“Persistently high prices are a burden for the American people, but the recent past need not be prologue,” he said after the meeting, where he also called for wide‑ranging reforms at the bank.

Warsh was appointed by Trump, who has launched an unprecedented assault on the Fed’s independence and criticised former chair Jerome Powell for not cutting rates enough.

Analysts noted that the Fed’s post‑meeting statement did not mention an easing bias, as it had previously, and that the emphasis was more on prices than on jobs.

Data this month has shown inflation at a three‑year high, while the labour market remains healthy.

“While there is no suggestion the Fed’s dual mandate has shifted away from unemployment as well as price stability, markets have been left with a view that the emphasis appears to have shifted to the latter for now,” wrote National Australia Bank’s Gavin Friend.