Oil prices fell about 5% for a second day in a row to a three-month low on Tuesday as details emerged of an interim deal to end the war in the Middle East and reopen the Strait of Hormuz, including an ‌agreement allowing Iran to sell oil.

Brent crude futures fell $4.21, or 5.1%, to settle at $78.96 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $4.70, or 5.8%, to settle at $76.05.

Those were the lowest closes for Brent since March 2 and for WTI since March 4.

The U.S.-Iran war started on February 28. On February 27, Brent closed at $72.48 a barrel, and WTI closed at $67.02.

"Crude oil is sliding fast on the ​assumption the Strait of Hormuz will open soon," Bob Yawger, director of energy futures at Mizuho, said in a note. Before the war, about 20% of ​global oil supplies passed through the strait.

Details of the interim deal to end the war began to emerge on Tuesday, with U.S. President ⁠Donald Trump saying it will rule out a nuclear weapon for Tehran and a U.S. official saying it allows Iran to sell oil upon signing.

The deal would extend a ​tenuous ceasefire announced in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the U.S. and Israel first attacked Iran.

Still, doubts swirled ​around the deal, with experts warning that shipping and energy exports could take weeks to recover. In Lebanon, the Iran-backed Hezbollah group said it believes Iran will not sign a final nuclear deal unless Israel withdraws from Lebanon.

"For now, a major vote of confidence is being applied to the success of this plan with limited regard to thorny issues such as financial compensation, sanctions and especially a satisfactory ​nuclear deal that was largely the reason behind the war," analysts at energy advisory firm Ritterbusch and Associates said in a note.

News of the preliminary agreement prompted investment banks, ​including Goldman Sachs, Morgan Stanley and Citi, to lower their oil price forecasts.

AROUND THE WORLD

Other factors weighing on oil prices included worries about China's economy, rising global inflation and interest rates, and ‌U.S. calls for ⁠peace between Russia and Ukraine.

China, the world's second-biggest economy, showed increasing unevenness in May, while the country's crude oil throughput fell 9.1% from a year earlier to its lowest level in almost four years.

Trump said Russia should make peace with Ukraine after a "very good" meeting with Ukrainian President Volodymyr Zelenskiy on Tuesday, sparking cautious optimism among Group of Seven (G7) leaders that a peace deal could be struck.

A settlement in the Ukraine war could lead to the lifting of some sanctions on Russia, allowing ​Moscow to export more oil. Russia was the world's third-largest crude oil producer ⁠, behind the U.S. and Saudi Arabia, in 2025, according to U.S. energy data.

In the U.S., most global brokerages are betting the Federal Reserve will hold interest rates steady for the rest of 2026, reversing from expectations of two interest rate cuts at the start of the ​year, as policymakers navigate elevated inflation risks and a resilient labour market.

The Bank of Japan raised interest rates to a 31-year ​high on Tuesday.

Higher interest rates raise consumer costs, which can reduce economic growth and oil demand.

U.S. OIL INVENTORIES:

The oil market awaited weekly storage reports from the American Petroleum Institute trade group later on Tuesday and the U.S. Energy Information Administration on Wednesday.

Analysts estimated energy firms pulled 4.6 million barrels of crude from storage during the week ended June 12.

If correct, that would be the first ⁠time energy firms ​pulled crude out of storage for eight weeks in a row since January 2025. It compares with ​a decrease of 11.5 million barrels in the same week last year and an average decline of 2.3 million barrels over the past five years (2021 to 2025).