Oil prices crash after US-Iran peace deal; crude slides as supply fears ease

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New Delhi: World oil prices eased as the world took a sigh of relief from concerns about a supply disruption in the Middle East, as the U.S. and Iran reached a breakthrough accord. The agreement is expected to mitigate the risks of an escalation of conflict in the key energy-producing Middle East.

The price dip occurs amidst rising optimism about continuous flow through the strategic Strait of Hormuz, through which nearly one-fifth of the world’s supply of oil flows, and had caused the oil price to rise earlier over fears of supply shortage.

With an easing in the geopolitical tensions, market participants adjusted oil prices that had a substantial risk premium and registered a significant correction, partly wiping away recent gains arising from geopolitical risks.

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The falling oil price is likely to provide some much-needed respite to oil-importing economies of the world, such as India, by lowering import costs, cutting inflation, and providing some sort of stability to the fuel prices in the immediate weeks ahead.

The experts say, however, that energy markets are volatile in nature and any setback in the peace deal or re-emergence of tensions could lead to sharp fluctuations in global oil prices again.

Import-dependent economies, on the other hand, would have energy prices at more manageable levels, which would reduce the inflationary pressures in economies.

Also Read: US-Iran ceasefire framework raises hopes for reopening of Strait of Hormuz

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