Global oil prices moved downward on Thursday following reports that President Donald Trump signed an agreement with Iranian President Masoud Pezeshkian aimed at ending the Middle East conflict, an event arriving alongside a fresh warning from the International Energy Agency regarding a looming supply surplus.
International benchmark Brent crude futures for August delivery fell 2.83% to settle at $77.30 a barrel, while U.S. West Texas Intermediate futures for July dropped 3.20% to land at $74.33 per barrel.
Adding an element of uncertainty to the geopolitical breakthrough, Trump informed reporters that he remains prepared to resume military action against Iran if Tehran does not stick to the terms of the deal, Reuters reported.
“We’re going to bomb the hell out of them if they violate the agreement,” Trump reportedly stated during a press conference. “I don’t want them to. I want them to honor the agreement.”
The International Energy Agency projected that a permanent end to the hostiles will likely unleash significantly larger production volumes, setting the stage for a major oil imbalance. According to the agency’s latest monthly market report, global supply is expected to dip by an average of 3.9 million barrels per day in 2026 to 102.4 million barrels per day, before bouncing back sharply to 110.3 million barrels per day next year.
“Our first look at 2027 balances shows a significant overhang emerging next year,” the IEA noted.
While retreating crude prices could alleviate fears of energy costs triggering wider inflationary pressures, analysts at New York Life Investment Management warned that the market is not entirely out of the woods.
“Oil remains above pre-conflict levels, shipping normalization will take time, and inventories and strategic reserves still need to be replenished,” the firm highlighted in its report.
