Oil prices fall as US-Iran peace deal eases supply fears
What's the story
Oil prices fell on Thursday after US President Donald Trump and his Iranian counterpart Masoud Pezeshkian signed a deal. The deal is expected to end the long-standing conflict in the Middle East and significantly increase oil supply, leading to a potential oversupply situation next year. The International Energy Agency (IEA) has also flagged this possibility in its latest report.
Market reaction
Oil prices drop on US-Iran peace deal news
Following the news of the US-Iran peace deal, global benchmark Brent crude futures for August fell by 1.13% to $78.65 per barrel. Similarly, US West Texas Intermediate futures for July dropped by 1.26% to $75.82 per barrel. Brent crude has fallen 15% over four days, its longest losing streak this year. The IEA report predicts that a lasting resolution to the conflict could lead to an oversupply of oil in 2027 as global supply may rise significantly next year.
Cautionary note
Oil supply may drop by 3.9 mbpd in 2026
The IEA's report also predicts a significant drop in global oil supply by an average of 3.9 million barrels per day (mbpd) in 2026 to 102.4 mbd, before recovering to 110.3MB/d next year. This forecast indicates a potential oversupply situation in the global oil market next year due to increased production and reduced consumption amid geopolitical tensions easing with the US-Iran deal.