Pakistan confirms Iran-US peace deal text, oil drops 3.8%

Pakistan confirmed Friday that a final, agreed-upon text for an Iran-US peace agreement has been reached, sending WTI crude oil down 3.8 percent to $84.35 a barrel and lifting US equities as traders priced in the end of a war that has disrupted global energy markets since late February.

"The agreement has been finalized and approved at the highest levels," Pakistani Prime Minister Shehbaz Sharif said in a statement, adding that Pakistan is working closely with Iran and the US on next steps. The confirmation follows days of conflicting signals from Washington and Tehran, with President Donald Trump claiming a "great settlement" Thursday while Iranian officials said no final decision had been made.

The memorandum of understanding, expected to be signed as soon as this weekend on the sidelines of the Group of Seven summit in Evian, France, would extend the current ceasefire by 60 days and reopen the Strait of Hormuz — a chokepoint that handles about 21 percent of global oil trade. The US would lift its naval blockade of Iranian ports, which has cost Tehran an estimated $500 million a day in lost exports, according to regional officials. Trump said Vice President JD Vance and special envoy Steve Witkoff would represent him at any signing ceremony.

The war, launched by the US and Israel on Feb. 28, has killed thousands, virtually shut down oil shipments from the Persian Gulf and pushed global inflation higher. Brent crude, which peaked at $125 a barrel in late April, has fallen nearly a third since then as traders anticipated a diplomatic resolution. The S&P 500 rose 0.5 percent Friday, with the Philadelphia Semiconductor Index gaining 2.1 percent, reflecting broad risk-on sentiment.

Nuclear Program and Regional Security

Central to the agreement is Iran's commitment to never develop or purchase a nuclear weapon, Trump said Thursday. Further negotiations over the next two months will address the dismantling of Iran's uranium enrichment infrastructure and the removal of enriched nuclear material — the same issues that prompted the US and Israel to launch "Operation Midnight Hammer" strikes on Iranian nuclear sites last June.

Israeli Prime Minister Benjamin Netanyahu said Friday he and Trump were in "full agreement" that Iran must not obtain nuclear weapons, though Israel is not a party to the deal. Israeli Defense Minister Israel Katz warned that Israel could still act independently toward Iran and would not withdraw from occupied zones in Lebanon, Syria and Gaza — a potential complication as Iran has insisted any final settlement must also end fighting between its ally Hezbollah and Israel.

Market Implications

The deal's confirmation triggered a sharp repricing across energy markets. WTI's drop to $84.35 represents a 45 percent decline from its late-April peak of $125, though the benchmark remains up about 45 percent year-to-date. The last time a major Middle East conflict ended with a negotiated settlement — the 2015 Iran nuclear deal — Brent crude fell about 7 percent in the month following the announcement before stabilizing.

For investors, the key question is whether the 60-day ceasefire holds and leads to a permanent agreement. The Strait of Hormuz reopening alone could add 3 million to 4 million barrels a day of Iranian crude to global markets, according to tanker tracking data, potentially keeping oil prices under pressure. The US naval blockade will remain in force until the memorandum is formally signed, Trump said on Truth Social.

This article is for informational purposes only and does not constitute investment advice.