Oil prices have dropped below $80 a barrel on optimism over the promised reopening of the Strait of Hormuz, easing inflation pressures on global economies, even though traders are eyeing the risk of Iranian “service fees” on ships transiting the strait.
Oil hit a three-month low on Tuesday as Brent North Sea crude, the international benchmark, dropped 4.0 percent to $79.87 a barrel, dipping below $80 for the first time since early March, before edging back up to $80.52.
The main US oil contract, West Texas Intermediate, slid 4.5 percent to $77.16 a barrel before rising to the brink of $78.
US President Donald Trump said the Strait of Hormuz would “completely open” once Washington and Iran sign their peace agreement on Friday in Switzerland.
Iranian media reported that three oil tankers and two cargo ships had already passed through.
Wall Street was cautious as the Dow was up just 0.6 percent at 51,958.08 points half an hour into trading, while the broader S&P 500 was up just 0.1 percent and the tech-heavy Nasdaq added 0.3 percent.
London and Paris had risen 0.7 percent two hours out from the close of trading while Frankfurt was just 0.2 percent in the green, while Asia ended mixed.
“Although the deal has not been formally signed, there already appears to be a peace dividend for markets,” said Kathleen Brooks, research director at trading group XTB.
“We are seeing European markets play catch-up with the US, and this could continue, as some European indices remain below their pre-war levels,” including London’s FTSE 100 index, she added.
Tehran blockaded the strait after the US and Israel launched their war against Iran on February 28, with Washington later halting shipping to and from Iranian ports.
