Oil prices tumbled on Monday after the U.S. and Iran agreed to a tentative peace deal to end the war in the Middle East.
The West Texas Intermediate contract for July delivery CL.1-5.64% CLN26-5.63% slid by more than 5% to $80.30 a barrel. That brings it down by a third since its intraday peak of $119.48 reached at the beginning of the second week of trading following the start of the conflict, according to Dow Jones Market Data. The August Brent crude contract BRN00-5.28% BRNQ26 -5.29% fell by 4.8% to $83 a barrel, down about 30% compared with its highest point during the year of $119.50.
While similar messages have been conveyed by the U.S. administration on numerous occasions, this development seems more significant since Iran, along with mediators from Pakistan and Qatar, have also signaled that an agreement is now in place,” said Ben May, director of global macroeconomic research at Oxford Economics, in a Monday client note.
U.S. President Donald Trump and officials from Tehran announced a tentative deal to extend the cease-fire by 60 days while a final agreement is negotiated. Pakistani Prime Minister Shehbaz Sharif said the deal would be signed in Switzerland on Friday.
The U.S. and international benchmarks are both still higher than their preconflict levels, with WTI crude up by close to 20% and Brent crude up 14%.
On the face of it, the fall back in the Brent oil price to around $80 per barrel suggests that markets now feel comfortable that the crisis is largely over,” May said.
U.S. gas prices on Monday dipped below $4 a gallon, based on GasBuddy’s national average, which means significant savings versus a month ago, but they are still much higher than a year ago, when U.S. crude prices were closer to $72 a barrel.
“Let the oil flow!” Trump wrote in a post on Truth Social on Sunday claiming that the Strait of Hormuz would be reopened. In a follow-up post, he said the strait would “reopen upon the signing of the deal on Friday, for purposes of mine removal.”
A retired U.S. Navy rear admiral told BBC Radio 4’s “Today” program that clearing the mines could take “weeks to months.”
Citing sources close to the Iranian negotiating team, the semiofficial Mehr News Agency reported that the draft of the 14-point memorandum of understanding included reopening the shipping route within 30 days, “under Iranian arrangements,” and the complete lifting of the naval blockade imposed by the U.S. over the same period.
Reflecting fresh optimism, bettors on Polymarket see a 64% chance that the Strait of Hormuz will reopen to normal shipping flow by the end of July. (Polymarket has a data partnership with Dow Jones, the parent company of MarketWatch.)
Analysts at Barclays, led by Ajay Rajadhyaksha, global chair of research, wrote in a note on Monday that they don’t expect a “sharp collapse” in oil prices. Since the effective closure of the strait at the beginning of March, inventories have fallen at a record pace and the process of getting rid of the backlog, reopening the shipping route and normalizing export levels will take months, they said.
Prices already have been “remarkably well behaved” for several weeks as investors anticipated a deal, the analysts noted.