Oil Prices Fall Amid Prospects of Fast Reopening of Strait of Hormuz — Update

By Ronnie Harui

Oil prices retreated in Asia Thursday afternoon as traders bet on a swift reopening of the Strait of Hormuz, the critical waterway through which roughly one-fifth of global oil shipments are typically transported.

Senior U.S. officials who read the text of the interim agreement between the U.S. and Iran said the "memorandum of understanding" would see Tehran reopen the strait after the U.S. lifts sanctions on Iran's oil sales. While the agreement was announced on Sunday, it hasn't been released to the public at Iran's request, according to the officials.

The text of the agreement stipulates there will be "no charge for 60 days only" for commercial ships, in exchange for the U.S. dropping its blockade and permitting Iran to sell oil.

"The energy sector pushed lower amid a concern of a flood of supply," ANZ Research analysts said in a report. However, "there remain concerns that ship owners will be reluctant to send oil tankers back into the Persian Gulf while there is a risk that the deal falls over," the analysts added.

Front-month West Texas Intermediate crude oil futures slid 2.4% to $74.96 a barrel and front-month Brent crude oil futures dropped 2.1% to $77.89 a barrel, according to ICE data.

Meanwhile, Asian government bonds fell in price terms on expectations of interest-rate increases by the Federal Reserve. The central bank, in its first statement under Chairman Kevin Warsh, indicated a commitment to deliver "price stability."

Although the Fed held interest rates steady on Wednesday as expected, its updated quarterly economic projections showed nine of 19 officials forecast at least one rate increase by the end of 2026, up from none in March.

"While the Fed kept rates unchanged as widely expected, the dot plot is hawkish," said Eugene Leow, senior rates strategist at DBS Group Research, in commentary. "The market was not prepared for a hawkish Fed," Leow added.

Yields on 10-year Japanese government bonds edged up 0.5 basis point to 2.605%, while 10-year Australian sovereign securities were 1 basis point higher at 4.7760% and 10-year New Zealand government debt advanced 6 basis points to 4.4400%. Bond yields move inversely to prices.

Equity markets across the Asia-Pacific region were mixed. Japan's Nikkei Stock Average rose 1.8% and South Korea's Kospi gained 1.6%, while Hong Kong's Hang Seng Index fell 1.8% and China's Shanghai Composite Index declined 0.4%.

Write to Ronnie Harui at ronnie.harui@wsj.com

(END) Dow Jones Newswires

June 18, 2026 01:45 ET (05:45 GMT)