Oil prices experienced a sharp decline after the U.S. and Iran moved closer to a peace agreement, easing concerns over disruptions in the Strait of Hormuz. According to The Economic Times, Brent crude futures dropped $4.71, or 4.55%, to $98.83 a barrel, while U.S. West Texas Intermediate crude declined $4.57, or 4.73%, to $92.03 a barrel. Both benchmarks touched their weakest levels since May 7 during the session. Despite the recent pullback, oil prices are still up more than 30% since the U.S. and Israel launched attacks on Iran on February 28. The decline was part of a broader market shift as investors responded to Middle East peace hopes, with Nasdaq futures up 1.2% and S&P futures rising 0.7%.
On Saturday, U.S. President Donald Trump said Washington and Tehran had 'largely negotiated' a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz. As reported by The Economic Times, Trump stated that negotiations are proceeding in an orderly and constructive manner, with his representatives not to rush into a deal when that time is on their side. However, Trump said on Sunday he had told his representatives not to rush into any deal with Iran, as his administration played down hopes of an imminent breakthrough. The Strait of Hormuz handled nearly one-fifth of global oil and liquefied natural gas shipments before the conflict began, making its reopening crucial for global energy markets.
Shares of Hindustan Petroleum Corporation Limited, Indian Oil Corporation and Bharat Petroleum Corporation Limited are expected to remain in focus as lower crude prices could help improve refining margins and reduce pressure on oil marketing companies' input costs. According to The Economic Times, downstream or oil marketing stocks usually come under pressure when oil prices rise, as their input costs increase sharply while their ability to pass these costs on remains limited. These companies buy crude at higher prices, refine it, and sell the end products, but pricing is often regulated, restricting full cost pass-through to consumers.
The oil price decline contributed to broader market movements as investors responded to Middle East peace hopes. The euro strengthened 0.33% to $1.1646, while the Japanese yen firmed to 158.85 per U.S. dollar as the safe-haven dollar gave up some of its recent gains. Japan's Nikkei jumped 3% to roar past the 65,000 level for the first time, with MSCI's broadest index of Asia-Pacific shares outside Japan rising 1%. Market analysts noted that while risk appetite improved, a sustained surge is unlikely until there is confirmation that the Strait of Hormuz will reopen, as there are still major sticking points in negotiations.
