WTI fell 2.3% to $78.15 after the U.S. and Iran agreed to a 60-day peace roadmap. The deal removes a $3-$5 risk premium but includes a 30-day review clause that could snap sanctions back.
Oil futures turned negative Monday after the U.S. and Iran agreed to a 60-day peace roadmap following talks in Switzerland. West Texas Intermediate crude fell 2.3% to settle at $78.15 a barrel. Brent crude dropped 1.9% to $82.40 a barrel.
The agreement, announced jointly by Swiss mediators, outlines a phased de-escalation of tensions in the Persian Gulf. Iran will halt enrichment above 60% purity and allow IAEA inspectors full access to its nuclear sites. In return, the U.S. will unfreeze $6 billion in Iranian oil revenue held in South Korean banks and pause sanctions enforcement on Iranian crude exports to China.
Traders had priced in a risk premium of roughly $3 to $5 a barrel on the threat of a Strait of Hormuz disruption. That premium evaporated within two hours of the announcement, according to data from ICE Futures Europe. The strait handles about 20% of global oil transit.
"The market was positioned for a breakdown, not a breakthrough," said John Kilduff, partner at Again Capital in New York. "The short-covering rally we saw last week on the war talk is now reversing."
The roadmap includes a 30-day review clause. If either side violates the terms, the deal collapses and sanctions snap back. That keeps a floor under prices, traders said, though it removes the immediate supply-risk bid.
Iranian oil exports have averaged 1.5 million barrels a day in 2025, up from 400,000 barrels a day in 2020, largely through Chinese independent refineries. A formal sanctions pause would legalize those flows and could add another 500,000 barrels a day to global supply within 90 days, according to Vortexa data.
OPEC+ delegates said the group would monitor the situation. They saw no need for an emergency meeting. The next scheduled meeting is June 1.
Goldman Sachs cut its 3-month Brent forecast to $80 a barrel from $85, citing the reduced geopolitical risk. The bank said the deal removes the "tail risk" of a 10% price spike. It warned that the 30-day review creates a new binary event in July.
Shipping rates for tankers crossing the Persian Gulf fell 12% on the day, according to the Baltic Exchange. War risk insurance premiums for vessels transiting the Strait of Hormuz dropped to 0.05% of hull value from 0.25% last week.
The agreement faces opposition from hardliners in both capitals. Iranian Foreign Ministry spokesman Nasser Kanaani said the deal was "a tactical pause, not a strategic shift." U.S. State Department officials declined to comment on internal administration divisions.
Oil options markets showed elevated activity in July $75 puts on WTI. That suggests some traders expect the deal to hold and prices to drift lower through the review period.
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