Oil prices fell sharply in Asian trading on Monday after Pakistan announced a framework agreement to end the war between the US and Iran, paving the way for the reopening of the Strait of Hormuz, a key global shipping route.

Brent crude, the global benchmark, dropped 4.8% to $83.18 a barrel, while US-traded West Texas Intermediate fell 5.6% to $80.13.

Pakistan’s Prime Minister Shehbaz Sharif said an official signing ceremony for the agreement would take place in Switzerland on 19 June. Iran’s Deputy Foreign Minister Kazem Gharibabadi also confirmed during a phone call on state television that a deal with the US had been finalised, while US President Donald Trump posted on social media: “let the oil flow!”

Despite the market’s initial reaction, Vandana Hari of Vanda Insights warned that uncertainty remained over the details of the agreement.

She said a lack of clarity on what had been agreed “is likely to inject unease and uncertainty into the market.”

Hari added that oil markets could face another week of uncertainty and price swings as traders assess the implications of the deal.

The Strait of Hormuz had been effectively closed shortly after the US and Israel launched airstrikes on Iran on 28 February. Tehran had threatened to target vessels using the strategic waterway, through which about 20% of global oil and liquefied natural gas supplies normally pass.

Global energy markets have seen sharp fluctuations throughout the conflict, with Brent crude rising from about $70 a barrel before the war to a peak of around $120 during the fighting.

Analysts cautioned that oil shipments through the Strait of Hormuz are unlikely to return immediately to pre-war levels.

Andrew Lipow of Lipow Oil Associates said mines would first need to be cleared from the waterway, a process that could take several weeks or as long as six months.

He also noted that a large backlog of tankers remains waiting to pass through the route, while oil production and loading operations may take weeks to return to normal.

Asian stock markets rose on Monday as investors welcomed news of the agreement and the prospect of reduced disruption to global energy supplies. (Arise News)