Oil slips 4% as US, Iran reach peace deal to reopen Strait of Hormuz
SEATTLE (Oil Monster): Oil prices fell to their lowest level since March on Monday after U.S. President Donald Trump and Iran’s deputy foreign minister said they had reached an initial deal to end the war and restore shipping through the Strait of Hormuz.
Brent and WTI fall as geopolitical risk premium unwinds
Brent crude futures dropped $3.58, or 4.10%, to $83.75 a barrel by 0004 GMT, while U.S. West Texas Intermediate fell $4.01, or 4.72%, to $80.87. Both benchmarks had already tumbled more than 3% on Friday, extending losses as traders moved to price in the prospect of restored oil flows.
U.S. and Iran signal framework to reopen Hormuz
The United States and Iran are expected to sign a memorandum of understanding in Switzerland on Friday, according to Pakistan’s prime minister, whose country has served as a mediator. Trump said on Sunday that the Strait of Hormuz would reopen “toll free” and that a U.S. naval blockade of Iranian ports would end.
Draft deal points to reopening within 30 days
Iran’s semi-official Mehr news agency said the draft agreement calls for reopening the Strait of Hormuz within 30 days under Iranian arrangements. The announcement has driven a sharp reassessment of supply risk after more than three months of severe disruption through one of the world’s most important energy chokepoints.
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Oil market remains focused on the pace of supply normalization
The world has lost millions of barrels of oil and gas supply since the war shut the Strait of Hormuz, a route that handles roughly one-fifth of global oil and liquefied natural gas flows. Investors are now watching how quickly Middle Eastern producers can restore exports, whether damaged infrastructure can recover, and how rapidly more ships will return to the region.
Analysts say restored flows could reset market balances
Tim Waterer, chief market analyst at KCM Trade, said the geopolitical risk premium in crude was being unwound aggressively as traders priced in the prospect of restored oil flows. Commonwealth Bank of Australia strategist Vivek Dhar said that if flows through Hormuz recover to 60% to 70% of pre-war levels, the market could return to pre-war oversupply expectations.
Nuclear talks and sanctions remain key sources of uncertainty
Iran’s deputy foreign minister Kazem Gharibabadi said a broader agreement would be negotiated during a 60-day ceasefire period. Meanwhile, the E4 nations — the UK, France, Germany and Italy — said they were prepared to lift sanctions on Iran in response to progress on its nuclear programme, though analysts cautioned that the next round of negotiations could still reshape the oil outlook.
Courtesy: www.reuters.com
People Also Ask
Why did oil prices fall after the U.S.-Iran announcement?
Oil prices fell because traders began unwinding the geopolitical risk premium as prospects improved for reopening the Strait of Hormuz.
How much did Brent and WTI drop in early trading?
Brent fell 4.10% to $83.75 a barrel, while WTI dropped 4.72% to $80.87.
When could the Strait of Hormuz reopen under the draft deal?
Iran’s semi-official Mehr news agency said the draft deal calls for reopening the strait within 30 days.
What share of global oil and LNG flows through the Strait of Hormuz?
The Strait of Hormuz handles roughly one-fifth of the world’s oil and liquefied natural gas supplies.
What level of Hormuz oil flows could return the market to pre-war oversupply expectations?
According to Commonwealth Bank of Australia, flows reaching 60% to 70% of pre-war levels could restore pre-war oversupply expectations.