Prices fall on hopes of sanctions relief and fresh Iranian supply; Brent down to US$64.67
Oil prices fell sharply on Thursday after US President Donald Trump said the US was “very close” to reaching a nuclear agreement with Iran — a deal that could unlock millions of barrels of crude and add to growing supply-side pressures in global markets.
Speaking in Doha during a Middle East tour, Trump said the US was engaged in “very serious negotiations with Iran for long-term peace.” His remarks followed comments from a senior Iranian adviser to Supreme Leader Ayatollah Ali Khamenei, who told NBC News that Tehran was open to a deal — provided certain sanctions were lifted.
“If an agreement is reached, and the deal is effectively enforced — which is hard to believe — then the Persian Gulf country’s crude oil exports can rise by as much as 1 million barrels per day,” said Tamas Varga, an analyst at brokerage PVM.
By the close of trade, WTI was trading at US$61.75 and Brent at US$64.66 both down around 2.2%.
Oil market faces threat of oversupply
The renewed prospect of Iranian oil returning to international markets comes at a time when global supply is already rising. OPEC+ — the alliance of OPEC and non-OPEC producers led by Saudi Arabia — has surprised markets by increasing output by 411,000 barrels per day in both May and June.
US shale firms, under pressure from falling prices and investor scrutiny, have already curtailed capital spending. Meanwhile, key producers like Saudi Arabia have taken on more debt to support national budgets amid weaker oil revenue.
According to Macquarie strategist Vikas Dwivedi, an agreement could immediately increase exports by 200,000–300,000 barrels a day, with more to follow. Iranian oil exports have already crept higher, reaching an estimated 1.7 million barrels per day in April.
“Trump wants a deal with Iran as he continues to pursue lower oil prices,” Dwivedi told Bloomberg.
Yet, despite Trump’s optimism, Iranian officials have been more cautious. Foreign Minister Abbas Araghchi urged the US to come to the next Oman-mediated talks with a “more realistic” approach, underscoring the fragile nature of negotiations.
Geopolitical backdrop and economic toll
The original 2015 Iran nuclear deal — known as the Joint Comprehensive Plan of Action — collapsed in 2018 when Trump withdrew US support and reimposed sanctions. Since then, Iran’s economy has suffered under the strain of isolation, inflation, and a currency crisis.
Recent military and political losses have compounded Tehran’s difficulties. The fall of the Assad regime in Syria — long Iran’s key regional ally — and the decimation of Hezbollah’s senior ranks by Israel have weakened its strategic position. Reports suggest senior Iranian officials lobbied hard to shift Supreme Leader Khamenei’s stance on negotiating with the US, arguing that diplomacy is now essential to regime survival.
Iran, OPEC’s third-largest producer, currently pumps around 3 million barrels per day, or roughly 3% of global output. Sanctions relief would dramatically increase that figure, potentially tipping oil markets into oversupply by late 2025.
Market reaction and broader economic signals
The decline in oil prices dragged energy stocks lower and rippled across other markets. Oil and gas shares in Europe fell nearly 2%, while government bonds of producers like Angola and Nigeria also took a hit. The US dollar and bond yields dipped slightly in response.
Brent crude has averaged just above US$63 a barrel so far in May — the lowest monthly average since 2021. Prices have fallen about 14% year-to-date, driven by trade uncertainty, weaker demand, and faster-than-expected OPEC+ output.
According to the International Energy Agency (IEA), oil demand growth is expected to slow further in the second half of the year as global trade headwinds build. “We’re seeing clear signs that the global economy is slowing and oil demand growth is slowing,” said Toril Bosoni, head of the IEA’s oil markets division.
Still, a final deal between the US and Iran remains uncertain. The date and location for the next round of talks have yet to be confirmed. For now, the mere prospect of a deal — and the potential flood of new supply it could bring — is enough to unsettle oil markets already grappling with a delicate balance.
