Oil prices fall as Iran war easing calms supply fears

Oil prices fell sharply as traders pulled back from the worst-case disruption scenario in the Strait of Hormuz, sending Brent crude to $73.74 a barrel, its lowest settlement since before the U.S. and Israel launched the war against Iran on February 28. At one point on June 25, Brent traded around $72.24 to $72.48 a barrel, nearly back to the price seen on the eve of the first strikes.

The drop marked a reversal from the panic that followed the outbreak of the conflict. Brent had climbed from about $72 a barrel on February 27 to nearly $120 at its wartime peak, a gain of more than 55%, as traders priced in the risk that Iranian retaliation or a blockade could choke off flows through the Strait of Hormuz, the narrow waterway that carries a large share of the world’s oil exports.

That fear eased as tanker traffic improved and expectations rose for more Middle East supply to reach the market. A U.S.-Iran peace deal framework also helped strip out part of the geopolitical risk premium that had been built into crude prices during the height of the fighting. The Strait of Hormuz had been effectively blocked for nearly four months before shipping began to recover.

Lower crude prices usually work through to gasoline, diesel, airline fuel, and eventually the broader inflation data that shapes Federal Reserve policy. The recent retreat gives consumers some relief after the war-driven spike, but the market had not fully normalized.

Low inventories, tanker delays, and lingering shipping uncertainty could keep fuel costs above pre-war levels for months.