US and Iran Sign Peace Deal - Strait of Hormuz to Reopen Friday

[Rachel93]

The biggest geopolitical news of the year has landed. The United States and Iran have reached a deal to end their war and reopen the Strait of Hormuz, with the formal signing ceremony scheduled for Friday in Switzerland. Trump posted on Truth Social that the deal is now complete, announced the toll-free opening of the Strait and the immediate lifting of the US naval blockade. Pakistan Prime Minister Shehbaz Sharif confirmed the US and Iran have declared an immediate and permanent termination of military operations on all fronts including Lebanon. Oil prices responded immediately with US crude dropping below 80 dollars a barrel for the first time since March, down more than five percent in early trading, and Brent futures falling close to 83 dollars.

The scale of the disruption this deal ends is hard to overstate. The Strait of Hormuz closure that began after US and Israeli attacks in late February had effectively removed around 20 percent of the world's oil supply from global markets. Goldman Sachs estimated the closure and attacks on energy infrastructure had reduced global daily production by 14.5 million barrels. Brent had not dropped below 100 dollars a barrel for nearly two weeks before today and had been up around 50 percent since the conflict began. US pump prices were running around 1.50 dollars per gallon above pre-war levels. The reopening of the Strait will take time, mine clearing and logistics mean the physical flow of oil will not immediately recover, but the direction of travel is clear and markets are pricing that in this morning.

What do you think the lasting economic and geopolitical consequences of this episode are, and do you believe the deal will hold?