Oil Prices Tumble as U.S.-Iran Deal Supports Hormuz Reopening
Oil prices fell more than 4% on Monday after the United States and Iran announced an interim peace agreement.
The framework aims to end months of conflict in the Middle East and restore shipping through the Strait of Hormuz.
Brent crude futures for August delivery dropped 4.1% to $83.79 per barrel by 02:17 ET, or 06:17 GMT.
Meanwhile, West Texas Intermediate crude futures declined 4.6% to $80.99 per barrel.
Brent and WTI Fall to Three-Month Lows
Monday’s decline extended the losses recorded during the previous week.
Both Brent and WTI fell to their lowest levels since March 10 as traders reduced the risk premium linked to possible oil supply disruptions.
The prospect of greater supply availability also increased selling pressure across energy markets.
U.S. and Iran Announce Peace Framework
U.S. President Donald Trump and Iranian officials announced the preliminary agreement on Sunday.
The plan would halt hostilities and allow maritime traffic to resume through the Strait of Hormuz.
Trump said he had authorized the removal of the U.S. naval blockade and supported the reopening of the strategic waterway without tolls.
He also encouraged international shipping companies to resume operations and allow oil supplies to begin flowing again.
Formal Agreement Expected This Week
The United States and Iran are expected to formally sign the agreement by Friday.
Iran said both sides would then negotiate a broader settlement during a 60-day ceasefire period.
According to Iran’s Mehr news agency, the draft agreement calls for the Strait of Hormuz to reopen within 30 days under arrangements managed by Tehran.
Sanctions Relief Could Boost Iranian Oil Exports
Reported details of the draft agreement include possible sanctions relief and limits on Iran’s nuclear activities.
The framework may also include measures designed to normalize Iranian oil exports.
These developments raised expectations that additional Iranian crude could enter global markets later this year.
The possibility of higher supply added further downward pressure to oil prices.
Strait of Hormuz Remains Central to Oil Markets
The expected reopening of the Strait of Hormuz has become the main focus for energy traders.
The waterway handles roughly one-fifth of global oil and fuel consumption. Therefore, any disruption can have a major effect on supply and prices.
Shipping delays, higher insurance costs and fears of prolonged shortages had previously pushed Brent crude above $120 per barrel during the height of the crisis.
Oil Supply Risks Have Not Fully Disappeared
Despite the market’s positive reaction, analysts warned that several risks remain.
The ceasefire still requires formal approval and successful implementation. In addition, tanker traffic may not immediately return to pre-war levels.
Shipping companies could remain cautious while assessing security conditions, insurance costs and the operational details of the reopening.
As a result, oil flows through Hormuz may recover gradually rather than immediately.
Federal Reserve Meeting Also in Focus
Investors are also preparing for a busy week of central bank decisions.
The U.S. Federal Reserve will hold its policy meeting on June 16 and 17.
Markets widely expect the Fed to leave interest rates unchanged. However, investors will closely examine its updated economic forecasts and guidance on future monetary policy.
Lower oil prices could help reduce inflation concerns and influence expectations for future interest-rate decisions.
