Global oil prices extended their decline on Tuesday, falling to their lowest levels in about three months as investors reacted positively to expectations that the Strait of Hormuz could soon reopen following a peace agreement between the United States and Iran.

Brent North Sea crude, the international benchmark for oil prices, dropped by 3.8 per cent to $79.99 per barrel, slipping below the $80 mark for the first time since early March. At the same time, the main United States oil contract, West Texas Intermediate, declined by 3.9 per cent to $77.61 per barrel.

The latest drop follows growing optimism in global energy markets after reports that Washington and Tehran had reached a preliminary peace arrangement that could pave the way for the resumption of normal shipping activities through the Strait of Hormuz, one of the world’s most important oil transit routes. About one-fifth of global oil supplies typically pass through the strategic waterway, making developments in the area closely watched by energy traders and governments worldwide.

Market sentiment has shifted sharply in recent days as fears of prolonged supply disruptions in the Middle East began to ease. Analysts noted that expectations of increased oil flows from the Gulf region and the possible return of previously disrupted exports have reduced concerns over tight global supply conditions.

The decline in crude prices comes after several months of volatility driven by tensions surrounding the Strait of Hormuz. Earlier in the year, restrictions on shipping through the channel contributed to a sharp rise in oil prices, with Brent crude at one point climbing above $100 per barrel amid concerns about global supply shortages.

According to market reports, some oil tankers have already resumed cautious movements through parts of the Gulf under enhanced security arrangements, while traders are increasingly betting on a broader reopening of the route in the coming weeks. The anticipated restoration of shipping activity is expected to boost crude supply to international markets and help stabilise energy prices.

Additional pressure on prices has come from signs of weaker demand in major consuming nations. Reports indicate that Chinese crude imports have slowed significantly in recent months, adding to concerns about global consumption levels and reinforcing the downward trend in oil prices.

Financial institutions have also adjusted their outlooks for the oil market. Some analysts now expect crude prices to remain under pressure if the peace process progresses and oil exports from the Gulf region continue to recover. Goldman Sachs recently revised its oil price forecasts lower, citing expectations of increased supply and softer demand growth.

Despite the optimism, market observers caution that uncertainty remains. Key details of the US-Iran agreement are yet to be fully finalised, and negotiations are expected to continue over the coming weeks. Traders are therefore likely to remain sensitive to any developments that could either accelerate or delay the reopening of the Strait of Hormuz.

For oil-importing countries such as Nigeria’s major trading partners across Asia and Europe, lower crude prices could help ease inflationary pressures and reduce energy costs. However, for oil-producing nations that rely heavily on petroleum revenues, including Nigeria, a sustained decline in crude prices could have implications for government earnings and budget projections if the downward trend persists.