Oil prices fell nearly 5% on Monday, with both Brent crude and West Texas Intermediate (WTI) closing at their lowest levels since early March, after the United States and Iran signed a memorandum of understanding aimed at ending the conflict and reopening the Strait of Hormuz.
Brent crude settled at $83.17 per barrel, down $4.16 or 4.76%, while WTI crude settled at $80.75 per barrel, down $4.13 or 4.87%. The decline erased a significant portion of the geopolitical risk premium that had accumulated during the conflict, as markets increasingly focused on the prospect of additional oil supplies returning to global markets.
The agreement, which is expected to be formally signed later this week in Geneva, reportedly includes provisions for reopening the Strait of Hormuz within 30 days. The waterway, which normally handles roughly 20% of global oil and liquefied natural gas shipments, has remained heavily restricted for more than three months, removing substantial volumes of crude oil from the market.
Despite the sharp selloff, uncertainty remains regarding how quickly production, exports, and shipping activity can return to normal levels. Industry analysts noted that logistical challenges, vessel availability, insurance concerns, and infrastructure repairs could slow the restoration of pre-conflict supply levels. The International Energy Agency estimates that more than 14 million barrels per day of oil production remain offline as a result of the conflict.
Several institutions lowered their oil price forecasts following news of the agreement. Citi reduced its Brent crude outlook for the second half of 2026, citing expectations that oil flows through the Strait of Hormuz will gradually normalize. However, analysts also noted that depleted global inventories, lower Strategic Petroleum Reserve levels, and the eventual replenishment of emergency stockpiles could provide support for oil prices over the longer term.
U.S. Strategic Petroleum Reserve inventories fell to 340.3 million barrels, the lowest level since 1983, following another large drawdown as part of the government’s emergency release program. Meanwhile, discussions between the United States and Iran are expected to continue on broader issues, including Iran’s nuclear program and the long-term framework for regional security.