Key Highlights

  • Crude oil fell more than 5% to around $80 per barrel, a two-month low.
  • The Strait of Hormuz is expected to reopen by the end of the week under the agreement.
  • The deal reportedly includes provisions for dismantling Iran's nuclear program alongside economic incentives.
  • The Strait of Hormuz disruption has affected roughly one-fifth of global oil shipments since late February.

Oil prices tumbled on Monday after the United States and Iran announced a peace agreement intended to end the Middle East conflict and pave the way for the reopening of the Strait of Hormuz within the week. Crude fell more than 5% to trade around $80 per barrel, marking its lowest level in two months.

President Donald Trump said oil shipments from the Persian Gulf could soon resume, with the agreement including the lifting of a US naval blockade on Iranian ports. The development removes one of the most significant disruptions to global energy supply chains since the conflict began.

According to reports on the agreement, the deal also includes provisions related to dismantling Iran's nuclear program, alongside economic incentives that would be extended to Tehran contingent on meeting its commitments under the agreement.

Iranian Deputy Foreign Minister Kazem Gharibabadi confirmed that a deal had been reached, stating that the full text of the agreement would be released following an official signing ceremony in Switzerland.

Oil markets have faced sustained disruption since the conflict erupted in late February, with the near-closure of the Strait of Hormuz affecting roughly one-fifth of global oil shipments and contributing to elevated crude oil prices throughout the conflict. The prospect of the strait reopening represents a significant shift for global oil supply dynamics, given its role as one of the world's most critical energy chokepoints.

For oil price markets, Monday's decline reflects the scale of the risk premium that had been priced into crude during the conflict, with prices falling sharply as that premium unwinds following confirmation of the agreement. The reopening of the Strait of Hormuz, once finalized, would restore a major artery for crude oil and liquefied natural gas flows that had been severely constrained for months.

Market participants are likely to continue monitoring developments closely ahead of the signing ceremony in Switzerland, with the final text of the agreement expected to provide further clarity on the timeline for the Strait of Hormuz reopening and the broader implications for global oil supply.