Oil prices continued their downward trend on Wednesday, reaching their lowest levels in more than three months as optimism surrounding a U.S.-Iran peace agreement fueled expectations that one of the world’s most important energy shipping routes could soon return to normal operations.

Brent crude, the global benchmark, traded at approximately $78.37 per barrel during early European trading, while U.S. West Texas Intermediate crude fell to around $75.45 per barrel. Both benchmarks have experienced a dramatic reversal after surging to nearly $120 per barrel during the height of the Iran conflict.

Hormuz Reopening Boosts Market Confidence

The market’s latest decline reflects growing confidence that the Strait of Hormuz will reopen by the end of the week. President Donald Trump stated earlier this week that the strategic waterway would resume full operations by Friday and remain open without transit charges, easing fears of continued disruptions to global energy flows.

The Strait of Hormuz serves as one of the world’s most critical energy chokepoints, handling a substantial portion of global oil and liquefied natural gas exports before hostilities disrupted shipping activity. The effective closure of the route following the outbreak of conflict on February 28 triggered severe supply concerns and contributed to a sharp increase in global energy prices.

The International Energy Agency has described the disruption as the largest supply interruption in the history of the global oil market. The closure forced energy consumers and governments worldwide to seek alternative supply routes while drawing down inventories to offset shortages.

Energy Markets Respond to Peace Agreement

The peace agreement has dramatically changed market sentiment. Brent crude has fallen more than 33% over the past month as investors increasingly price in the return of Gulf energy exports. Natural gas markets have also responded positively, with European benchmark prices trading below €42 per megawatt-hour.

Despite the market’s optimism, significant uncertainty remains. Negotiators continue working through unresolved issues, including the future of Iran’s nuclear program and the implementation details of a permanent settlement. Investors are also watching developments involving Israel, which has expressed reservations about aspects of the broader diplomatic process.

Recovery Timeline Remains Uncertain

Another key concern involves the speed of production recovery across the region. Energy companies may require considerable time to restore operations, restart infrastructure, and normalize export schedules after months of disruption.

Particular attention remains focused on Qatar’s Ras Laffan industrial complex, the world’s largest liquefied natural gas export facility. Reports of damage to infrastructure during the conflict have raised questions about how quickly LNG exports can return to full capacity.

Why Europe May Not Feel Immediate Relief

For Europe, lower oil prices may not immediately translate into substantial relief for consumers and businesses. Although the continent imports only a limited share of its energy directly through the Strait of Hormuz, European economies remain heavily exposed to global benchmark pricing. The region imports approximately 80% to 85% of its oil needs, making it vulnerable to fluctuations in international crude markets.

Industry experts also note that transportation and insurance costs continue to support higher delivered energy prices. War-risk insurance premiums remain elevated, and shipping companies are still assessing operational risks associated with returning vessels to the region. Insurers and freight operators are expected to require sustained evidence of stability before significantly lowering rates.

Outlook for Global Energy Markets

While the reopening of the Strait of Hormuz marks an important step toward normalizing global energy markets, the full economic benefits may take longer to materialize. Investors, policymakers, and energy companies will continue monitoring developments closely as negotiations progress and shipping activity gradually resumes.