Oil prices fall with news of Iran deal, but could take time to normalize

With a possible deal between the United States and Iran on the table Monday, analysts say Long Island drivers can likely expect a drop in gas prices over the coming weeks and months.

The United States and Iran reached an initial agreement Sunday to extend a ceasefire and, after a deal is signed, reopen the Strait of Hormuz. Details about the agreement are not yet available, although The Associated Press reports it gives 60 days for a decision on what to do with Iran’s uranium stockpile and nuclear program.

“So far, it seems like excellent news,” Stony Brook University economist Juan Carlos Conesa said, pointing out oil prices have fallen to their lowest levels since March.

Brent crude oil dropped more than 4% on Monday to around $83 per barrel, according to Trading Economics, after peaks well over $110 per barrel after the outbreak of the war.

Long Islanders drive more than than the average American, so a drop in gas prices should help ease affordability pressures for households in the region, said Barbara Denham, a lead economist with Oxford Economics.

The average cost for a gallon of gas on Long Island is around $4.15, according to the latest data from AAA. That’s a drop from around $4.53 per gallon last month.

The news will also increase the likelihood that more people will travel outside the region in coming months, she said, noting even “the psychological impact of the prospect of lowering gas prices will have a positive impact on the economy.”

A Monday report from Oxford Economics noted  both sides considering an agreement reduces the risk of a “recession-inducing oil price spike,” but it will “take time for shipping in the Strait of Hormuz to approach pre-war levels.”

The deal will likely reduce overall inflation but provide a limited economic boost, meaning it’s unlikely the Federal Reserve will hike rates, the report said.

The extended ceasefire led to a spike in major indexes early Monday, with tech leading a surge in U.S. trading, said Joe Mazzola, head trading and derivatives strategist at Charles Schwab.

“It could take weeks or months for the oil market to normalize,” Mazzola said in a statement.

A drop in oil prices will mean slower inflation, but that does not mean prices will go down, Conesa said.

With AP

By Brianne Ledda

brianne.ledda@newsday.com@brianne_ledda

Brianne Ledda covers personal finance and affordability for Newsday. She previously covered Southold and Greenport for The Suffolk Times and is a graduate of Stony Brook University.