LONDON — Oil prices declined sharply on Monday following the announcement of a U.S.-Iran ceasefire agreement that includes provisions to reopen the Strait of Hormuz, market participants and officials said.
Brent crude, the global benchmark, settled down more than 4% to around $83 per barrel, while U.S. West Texas Intermediate crude fell to approximately $80 per barrel, reaching their lowest levels in over three months, according to trading data. The drop came after President Donald Trump announced the framework deal, which extends a ceasefire and aims to restore oil flows through the critical waterway.
The agreement, described as a memorandum of understanding, follows months of conflict that had disrupted shipping in the Strait of Hormuz, through which about one-fifth of global oil and LNG supplies typically pass. Trump stated that the strait would reopen for toll-free shipping once the deal is formalized, potentially as early as this week, the White House and Iranian officials indicated.
A signing ceremony is expected on Friday in Switzerland, with 60 days of further talks planned on broader issues including Iran's nuclear program, according to statements from both sides. Pakistani Prime Minister Shehbaz Sharif, who helped mediate, confirmed the framework agreement.
"This deal represents a step toward de-escalation and restoring stability in energy markets," a senior U.S. administration official said, speaking on condition of anonymity to discuss ongoing diplomacy.
Oil prices had risen significantly during the conflict, with Brent peaking near $120 per barrel at times, far above pre-conflict levels around $70. The latest decline reflects investor hopes for resumed supply and reduced geopolitical risk premiums, analysts noted.
Energy traders and industry groups cautioned that full normalization of prices and supply chains could take months, citing the need to ramp up production, clear port backlogs and address lingering uncertainties. U.S. gasoline prices are expected to ease gradually but may not return to pre-war levels until later in the year or into 2027, according to fuel market observers.
The development comes amid broader market reactions, with stock indices rising on reduced risk sentiment. No immediate disruptions to current oil flows were reported following the announcement, though maritime security remains a focus.
As of Wednesday, oil prices continued to trade near the post-announcement lows, with traders monitoring implementation of the ceasefire terms. Further details on enforcement mechanisms remain under discussion between the parties.
