Oil prices tumbled more than $2 a barrel on Thursday, reaching their lowest levels since early March, after the United States and Iran signed an interim deal to end hostilities and reopen the strategic Strait of Hormuz. The agreement shifts market focus from supply disruptions to the potential pace of returning Iranian crude exports.
Brent crude futures settled at $77.41 per barrel, down $2.14, while U.S. West Texas Intermediate crude fell $2.36 to $74.43. The decline reflects trader expectations of a faster-than-anticipated return of Iranian barrels to global markets, according to Tony Sycamore, market analyst at IG.
At the pump, the national average for regular gasoline stood at $3.999 per gallon on June 18, according to AAA. That marks a decline from $4.129 a week earlier and $4.515 a month ago, but remains above year-ago levels. Diesel averaged $5.129 per gallon. However, immediate relief for drivers may be limited as U.S. crude and gasoline stockpiles remain below typical seasonal averages.
The Energy Information Administration reported commercial crude inventories fell by 8.3 million barrels last week to 418.2 million barrels, about 6% below the five-year average. Gasoline stocks also declined by 0.9 million barrels and stand 6% below the five-year average. Refineries operated at 96.7% of capacity, indicating robust processing activity.
The interim 14-point memorandum gives Washington and Tehran 60 days to finalize a comprehensive deal. Under the terms, the U.S. will begin easing its naval blockade, while Iran commits to using its best efforts to allow toll-free commercial passage through the Strait of Hormuz within 30 days. The strait handled approximately 25% of global seaborne oil trade in 2025, according to the International Energy Agency.
Gregory Brew, senior analyst for Iran and oil at Eurasia Group, told New York Magazine that U.S. gasoline prices typically move in lockstep with global crude. If the deal holds, renewed Gulf supplies would exert significant downward pressure on prices, but not immediately. Brew expects gasoline prices to remain above $3.50 per gallon due to low inventories and the time needed to ramp up regional production.
Early signs of recovery are emerging. The IEA noted that Gulf crude shipments have picked up in early June, with ship-to-ship transfers in the Gulf of Oman pushing flows from a May low of 9.6 million barrels per day to around 12 million barrels per day. However, a full recovery will take time as mines need clearing and supply chains must normalize. The IEA also warned that a recovery in Middle East supply could create a hefty surplus in the oil market by 2027.
Competitive dynamics are shifting as well. While Saudi Arabia and the United Arab Emirates have pipeline alternatives bypassing Hormuz, most other Gulf exporters remain dependent on the strait. During wartime shortfalls, producers in the Americas stepped in to fill the gap. If Iranian and other Gulf supplies return amid sluggish demand, those American producers could face price pressure.
The deal remains fragile. A senior U.S. official indicated that either side could withdraw, and key sticking points—sequencing, sanctions, and Iran's nuclear program—remain unresolved. Mukesh Sahdev, CEO of XAnalysts, told Reuters that some shipowners may hesitate to send tankers back, and crude demand could come faster than supply, limiting further price declines.
Motorists are seeing mixed savings at the pump. AAA data shows regular gas at $3.399 in Indiana and $3.493 in Texas, while California and Washington stations remain much higher at $5.642 and $5.436. Taxes, fuel standards, and distance to supply keep prices elevated in those states, even with cheaper crude.
