Brent crude fell 4.7% and WTI 5.2% after Trump's Iran deal reopened the Strait of Hormuz. The real supply impact may take weeks, traders said.
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Crude oil futures fell more than 4% Monday morning after President Donald Trump said the U.S. had reached a peace deal with Iran and would remove the naval blockade on the Strait of Hormuz. Brent crude settled near $83.25 a barrel, down 4.7%. WTI crude slid 5.2% to $80.51.
Trump announced the deal in a Truth Social post, authorizing the "toll free opening" of the Strait and the removal of the blockade. "Ships of the World, start your engines. Let the oil flow!" he wrote. Iran's Deputy Foreign Minister Kazem Gharibabadi said a more expansive peace agreement would be negotiated during a 60-day ceasefire period, according to Reuters.
The market reaction is straightforward: the risk premium that had built into crude prices over recent months – the possibility of a conflict that could shut the Strait – evaporated in a morning. For traders who had been long oil on geopolitical tension, the unwind hurt. A more cautious read is that the real supply impact will take weeks to materialize.
Iran's return to export markets is not instantaneous. Even with the Strait open, mine clearance, insurance, and shipping logistics will take time. Several oil traders said the immediate move is sentiment-driven, not supply-driven. The 60-day ceasefire means the full peace agreement is still being negotiated. A breakdown in talks could reverse the move just as quickly.
For crude traders, the next concrete question is whether OPEC+ adjusts its output policy at the upcoming meeting. Lower prices could prompt Saudi Arabia and Russia to extend or deepen cuts. The U.S. also has the ability to adjust its strategic petroleum reserve releases.
The reopening of the Strait also affects LNG and tanker markets. A LNG Tanker Heads for Hormuz as Iran Deal Reopens Strait report earlier noted the immediate test of the passage.
Monday's session shows how quickly a geopolitical risk premium can unwind. Traders will watch the 60-day negotiating period for any sign the deal holds.
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