Gas prices dropped after Iran reached an agreement to dramatically reduce their nuclear programs in return for lifting of sanctions placed by the United States which have affected their oil exports, according to BBC News.
Iran, which has the fourth-largest oil reserve in the world, has seen cutbacks in their oil exports since Nov. 2011 when Washington threatened to avoid oil buying transactions with any financial institutions dealing with Iran's central bank, BBC News reported.
The threat caused major Iranian oil buyers like China, Japan, and South Korea to cut their imports, BBC News reported. Since the deal to reduce Iran's nuclear activities was agreed upon this weekend, tensions between the U.S. and the Middle East are diminishing even though the major oil producing country will not be allowed to raise taxes on the oil for another six months.
"There are a lot of sanctions that have been eased, which will allow Iran to slowly re-enter the global economy," Jonathan Barratt, chief economist at Barratt's Bulletin said, according to BBC News. "And as for oil - it's a just a six-month waiting period. If they tick all the boxes during that time, they will be back in that sector as well."
Airline and travel firms who are large buyers of fuel are seeing highs in the stock market due to the deal, BBC News reported.
According to a fact sheet released by the White House, European Union's also imposed a ban on imports, allowing the U.S. to cut Iranian oil sales from 2.5 million barrels per day in 2012 to 1 million bpd in 2013.
Many believe a long-term agreement in the works, due to the upcoming Geneva talks, might lead to an increase in oil sales from Iran, but analyst are stating oil prices in the U.S. are likely to drop further, BBC News reported.
"This news is hot off the press, and so there is some knee-jerk reaction," Ben le Brun, a market analyst at OptionsXpress in Sydney, told BBC News. "The market will probably want to see the nitty-gritty details of the agreement before we see any further significant declines in prices."
