WTI crude oil prices fell more than 5% to $75.54 per barrel on Tuesday, hitting their lowest level since the first week of March and erasing the bulk of the conflict-driven price surge, as markets priced in the imminent restoration of Gulf energy exports following the US-Iran peace agreement.

Key Highlights

  • WTI crude fell more than 5% to $75.54 per barrel, its lowest level since early March.
  • Brent crude dropped 4.39% to $78.96, while the front-month Brent contract fell 4.76% to $79.21.
  • The US Strategic Petroleum Reserve fell to a 43-year low during the conflict period.
  • NYMEX crude futures are approaching their 200-day simple moving average, a closely watched technical level.

WTI crude oil prices tumbled more than 5% to $75.54 per barrel on Tuesday, with front-month NYMEX futures falling 5.45% to $76.35, as oil markets rapidly unwound the geopolitical risk premium built up during months of Middle East conflict on expectations that Gulf energy exports will resume imminently following the framework agreement between the United States and Iran.

Brent crude fell 4.39% to $78.96 per barrel, with the front-month Brent contract declining 4.76% to $79.21, marking the steepest single-session decline for crude since the early stages of the conflict and pushing prices to their lowest levels since early March, before the Iran war's full impact on energy markets had been priced in.

Both the United States and Iran continued to signal on Tuesday that they will formally sign a memorandum of understanding on Friday in Switzerland. The reported terms of the agreement include provisions allowing tankers to transit the Strait of Hormuz immediately upon signing, with the United States reportedly unopposed to Tehran deploying its own tankers through the waterway without delay. The speed of the anticipated reopening has been a key driver of Tuesday's sharp price decline, as markets had previously assumed a more gradual and negotiated resumption of traffic through the strait.

The anticipated restoration of Gulf supply comes against a backdrop of significant inventory depletion across the global oil system. US Strategic Petroleum Reserves fell to a 43-year low during the conflict period as the government released reserves to cushion the domestic impact of supply disruptions, while Chinese oil stockpiles were drawn down sharply as the world's largest crude importer refrained from purchasing oil at elevated prices in order to avoid propping demand further amid the supply squeeze.

Fresh supply from the region is expected to replenish refineries globally, with the recovery supported by higher export quotas from OPEC+ alongside the anticipated restoration of output from the UAE, which had left the cartel during the conflict. Iranian output is expected to flow primarily toward Chinese stockpile replenishment given Beijing's role as Tehran's largest crude customer, a dynamic that could provide a near-term floor for Iranian production levels once exports resume.

From a technical standpoint, NYMEX front-month crude futures are approaching their 200-day simple moving average, a level that will be closely watched by technically oriented traders as a potential support zone following Tuesday's sharp decline. A sustained break below the 200-day moving average would represent a meaningful technical deterioration and could invite additional selling from systematic and trend-following strategies.

Market commentary following Tuesday's move struck a cautiously optimistic tone on the durability of the decline. Post Oak Group's managing director of capital markets described the speed of oil's drop as encouraging, noting it reflects the scale of fear and uncertainty that had been priced into the market during the conflict. However, he cautioned that prices are unlikely to fall significantly further given seasonal demand tailwinds including summer travel, airline fuel consumption, and the need to rebuild storage levels that have been substantially drawn down during the crisis period.