Adedokun Waliyu 
Oil prices fell sharply on Thursday after US President Donald Trump and his Iranian counterpart signed an agreement to end the conflict between their countries and reopen the Strait of Hormuz.
The development raised hopes for a lasting peace after more than three months of war, which disrupted global energy markets and contributed to rising inflation.
However, investor optimism was tempered by expectations that the US Federal Reserve may raise interest rates before the end of the year. At his first policy meeting as Fed chairman, Kevin Warsh acknowledged that persistently high inflation remains a burden on Americans.
Trump signed the memorandum of understanding in Versailles following the G7 summit, confirming to reporters that the agreement had been completed.
Iranian Foreign Ministry spokesman Esmaeil Baqaei also confirmed that the document had been finalised with the signatures of both presidents.
Attention has now shifted to the Strait of Hormuz, a key global shipping route through which about one-fifth of the world’s oil passes. Iran had effectively closed the strait after the outbreak of the conflict on February 28.
Pakistan’s Prime Minister Shehbaz Sharif, whose country helped mediate the agreement, announced that Iran would immediately reopen the Strait of Hormuz while the United States would lift its naval blockade.
The agreement also provides for the immediate removal of US oil sanctions on Iran and support for the release of a $300 billion reconstruction fund. In return, Iran will dilute its stockpile of enriched uranium while negotiations continue on a long-term nuclear agreement.
Crude oil prices dropped by more than one percent on Thursday, extending losses recorded since reports of the agreement first emerged. Overall, benchmark oil prices have fallen by more than 15 percent over the past week.
Stephen Innes of SPI Asset Management said the signed agreement and the reopening of the Strait of Hormuz should remove much of the geopolitical risk premium that had pushed oil prices higher.
Despite falling oil prices, stock markets showed mixed performances after the Federal Reserve left interest rates unchanged but indicated that further rate increases could be possible within the next six months.
Markets in Tokyo, Seoul, Singapore, Taipei, and Manila recorded gains, while Hong Kong, Shanghai, Sydney, Wellington, and Jakarta closed lower.
Federal Reserve Chairman Kevin Warsh reaffirmed the central bank’s commitment to restoring price stability, noting that inflation has remained above its two percent target for several years.
Warsh, who was appointed by President Trump, said recent high prices have placed a heavy burden on American households and stressed that bringing inflation under control remains a priority.
Analysts observed that the Federal Reserve’s latest policy statement placed greater emphasis on controlling inflation than supporting employment, reflecting concerns over persistent price pressures despite a healthy labour market.
At the close of trading, West Texas Intermediate crude fell 1.7 percent to $75.47 per barrel, while Brent crude declined 1.4 percent to $78.42 per barrel.
