Oil prices fell sharply on Monday after the United States and Iran reached an interim agreement to end their months-long conflict and reopen the Strait of Hormuz, a critical chokepoint that handles about a fifth of global oil and liquefied natural gas shipments.
Brent crude dropped more than 4% to around $83.79 a barrel, while West Texas Intermediate fell 4.6% to near $81, both hitting their lowest levels since March 10. The deal, announced by President Donald Trump on social media, includes the “toll free opening” of the strait and the removal of the U.S. naval blockade. “Ships of the World, start your engines. Let the oil flow!” Trump wrote. Iran’s Deputy Foreign Minister confirmed a deal was reached, with a signing ceremony expected in Switzerland on Friday and a 60-day ceasefire to follow.
The war began in late February when the U.S. and Israel struck Iran over its nuclear program, leading Iran to shut the strait and launch strikes across the Persian Gulf. At the peak of the crisis, Brent crude surged above $120 a barrel. Although the reopening lifts immediate supply fears, analysts caution that full normalization of trade flows could take months. Remaining mines, elevated insurance costs, and refinery supply chains already diversified away from the strait will slow recovery. Bloomberg noted that many buyers will continue relying on alternative pipelines and routes through Saudi Arabia, the UAE, and Oman until security guarantees are firmer.
Citi estimates that China can sustain imports near 8.7 million barrels per day without significantly depleting inventories, suggesting Asian demand won’t quickly boost prices. BMO Capital Markets observed that alternative shipping and diplomatic efforts have kept oil prices contained despite repeated strikes. The decline in oil could ease inflation pressures, a backdrop ahead of the U.S. Federal Reserve’s policy meeting on June 16–17, where rates are expected to hold steady.
