LONDON — Oil prices tumbled on Monday as markets reacted to a preliminary agreement between the United States and Iran aimed at reopening the Strait of Hormuz following months of conflict-related disruptions.
Brent crude futures fell more than 4% to around $83.75 per barrel, while West Texas Intermediate dropped nearly 5% to about $80.87, according to market data. The declines came after U.S. and Iranian officials signaled progress toward a memorandum of understanding that would restore shipping through the vital waterway.
The Strait of Hormuz, through which about one-fifth of global oil supplies passed before the disruptions, had been restricted amid the conflict. The proposed deal includes reopening the strait to international shipping without tolls, lifting the U.S. naval blockade on Iranian ports and extending a ceasefire for 60 days to allow further negotiations, sources familiar with the talks said.
U.S. President Donald Trump and Iranian officials have described the framework as an initial step, with a formal signing expected as soon as Friday in Switzerland. Nuclear issues are to be addressed in subsequent talks, according to statements from both sides.
"Both sides had agreed on a text and Washington expects to sign an initial deal in the coming days," a senior U.S. administration official said, as reported by Reuters. Iranian officials described the outcome as a victory, while emphasizing that full details of the agreement remain subject to finalization.
The news eased concerns over prolonged supply disruptions that had driven up energy costs worldwide. Oil prices had surged earlier in the conflict due to attacks on infrastructure and restrictions in the Persian Gulf, though exact production impacts varied by source.
Analysts noted heavy trading volume as investors priced in the potential return of flows through the strait. However, implementation timelines remain unclear, with some reports indicating full restoration of pre-conflict shipping could take weeks.
The agreement comes amid broader regional tensions, including developments in Lebanon. Israeli officials have expressed reservations about the deal, though the U.S. has said military pressure contributed to the outcome.
As of late Monday, oil prices were holding near session lows. Energy markets continued to monitor developments ahead of the expected signing, with traders cautious about potential delays or changes to the framework. The companies and governments involved have not released further operational details.
