Oil Falls Below $80 a Barrel on Deal to Reopen Strait of Hormuz

Oil prices dropped below $80 a barrel Tuesday on optimism over the promised reopening of the Strait of Hormuz, easing inflation pressures on global economies. The drop accelerated to more than five percent after a report by the Wall Street Journal that Washington could ease sanctions on Iranian crude as part of the deal to end the war in the Middle East, allowing Tehran to immediately sell crude and refined oil products.

International benchmark Brent North Sea crude fell to a three-month low under $79 per barrel. The main U.S. oil contract, West Texas Intermediate, fell 5.9 percent to under $76 a barrel. Earlier, President Donald Trump said the Strait of Hormuz would "completely open" once Washington and Iran sign their peace agreement on Friday in Switzerland.

Iranian media reported that three oil tankers and two cargo ships had already passed through. Wall Street was cautious, with the Dow adding 1.0 percent, but the broader S&P 500 dipped less than 0.1 percent and the tech-heavy Nasdaq shed 0.4 percent.

Department data showed that America's strategic oil stockpiles sank last week to their lowest level since 1983, indicating sustained demand to rebuild them even if the Mideast conflict ends. US Federal Reserve Chairman Kevin Warsh kicked off his first meeting in charge of the central bank's rate-setting committee on Tuesday, with policymakers largely expected to keep rates steady as the fallout of the Iran war ripples through the world's largest economy.

The Bank of England is also expected to stand pat. The yen was little changed after the Bank of Japan on Tuesday raised interest rates to their highest level since 1995.

Tehran blockaded the strait after the US and Israel launched their war against Iran on February 28, prompting Washington to later halt shipping to and from Iranian ports. Shipping data show only a fraction of normal tanker volumes moving through the Strait of Hormuz.