US-Iran ceasefire deal sends oil to three-month low as fuel relief may take months

Oil prices have fallen to a three-month low after a preliminary deal to end the US-Israel war on Iran and reopen the Strait of Hormuz, but analysts say American drivers are unlikely to see immediate relief at the pump. The strategic waterway has been closed for more than three months, disrupting a route that normally carries about one-fifth of the world's oil and liquefied natural gas. The market reaction has been swift, yet the consumer impact is expected to lag because of supply bottlenecks and strong summer demand.

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On Monday, petrol prices in the United States were still above $4 per gallon, averaging $4.06 nationwide, according to the American Automobile Association. That was down from an early-May peak of $4.48 per gallon, but still well above the $2.98 level recorded on 28 February, when the US and Israel first struck Iran and global energy markets began to tighten. Energy prices in the US have risen 7.7 percent over the last two months and are up 40 percent from a year ago, according to the latest inflation report from the Labor Department's Bureau of Labor Statistics.

The immediate reason for the price drop is the expectation that shipping through the Strait of Hormuz may resume, easing pressure on global supply. Even so, producers are expected to need time to ramp up output, while port bottlenecks and elevated summer demand continue to support prices. One petroleum analyst said the deal could push prices lower in the next two to three days, but warned that a return to pre-war levels could take many months and possibly longer than a year if inventories recover slowly.

The episode matters because the Strait of Hormuz is one of the world's most important energy chokepoints, and any disruption there quickly feeds into global oil and fuel markets. Asian economies are especially exposed because they rely more heavily on oil shipped through the strait than North American markets do. The latest move also shows how a ceasefire or preliminary diplomatic breakthrough can affect markets before the practical effects are felt by households and businesses.

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The conflict has already had a visible effect on US consumers, with petrol prices climbing sharply over recent months as tensions escalated. The latest figures suggest that even after a diplomatic breakthrough, the path back to lower prices is likely to be uneven. That is partly because fuel markets respond not only to the reopening of shipping routes, but also to refinery output, distribution capacity and broader demand patterns.

The deal has also drawn attention because of the wider diplomatic context around the war and the negotiations that preceded it. Market participants have been watching for signs that Washington and Tehran could reduce the risk of further disruption, and the price fall suggests traders are treating the ceasefire as credible for now. The mention of outside powers helping shape the diplomacy adds to the sense that the agreement has implications beyond the immediate conflict zone.

For now, the key unknowns are whether the ceasefire holds, how quickly the Strait of Hormuz fully reopens, and whether producers can restore supply fast enough to ease prices. It is also unclear how long elevated summer demand and logistics constraints will keep US petrol prices above pre-war levels. The next few days will show whether the oil market's sharp reaction translates into a sustained decline for consumers or only a temporary dip.

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