Oil prices have plummeted more than 15 percent since last week, returning almost to pre-war levels as Middle East peace prospects rise. The decline and a subsequent rise in stocks followed a U.S.-Iran interim peace deal and an announcement from Pakistan that the agreement to reopen the Strait of Hormuz would take effect immediately.
The agreement has eased the global crude market's biggest ever supply shock, with shipping and tanker traffic through the Strait of Hormuz starting to return to normal. As immediate supply fears fade, analysts expect the interim deal to release more than 85 million barrels of oil stranded in the Middle East Gulf into global markets.
The IEA stated that a lasting resolution to the conflict could drive a surge in supply volumes and trigger a major oil overhang next year. With the immediate crisis subsiding, traders are now turning their attention back to oil demand and OPEC's outlook for the market.