Oil prices settled near their lowest level in three months on Monday, steadying after a sharp two-day slide as traders bet a deal to end the U.S.-Iran war could soon reopen the world’s most important oil shipping lane.

The decline followed a Sunday-night announcement by President Donald Trump, who said on social media that an agreement with Iran was “complete” and that oil would once again move through the Strait of Hormuz after a planned signing ceremony Friday. Iran’s Deputy Foreign Minister, Kazem Gharibabadi, also confirmed that a deal had been reached and said the full text would be released following a signing event in Switzerland.

By Monday afternoon, West Texas Intermediate (WTI) crude, the U.S. benchmark, was trading near $80.50 per barrel, down about 5%, while global benchmark Brent crude slipped roughly 4% to around $83 per barrel. Both benchmarks touched their lowest levels since March 10 and have now fallen approximately 20% from the highs reached earlier this spring when fears of prolonged supply disruptions sent oil prices above $100 per barrel.

At the center of the market’s focus is the Strait of Hormuz, the narrow waterway connecting the Persian Gulf to the Arabian Sea.

Roughly one-fifth of the world’s oil supply moves through the strait each day. When fighting erupted in late February and Iran moved to restrict shipping through the passage, traders feared a major supply shock, pushing crude prices sharply higher. The prospect of reopening the route is now having the opposite effect.

More oil flowing through global markets generally means lower prices.

Despite the sharp decline, oil did not collapse further Monday because traders remain cautious about how quickly supplies can normalize.

Months of conflict have damaged energy infrastructure throughout the region, including pipelines, export facilities and refinery operations. Shipping companies also remain wary of security risks, while inventories across parts of the Gulf have been reduced after months of disruption.

As a result, many analysts expect any reopening of the Strait of Hormuz to be gradual rather than immediate.

There is also uncertainty surrounding the durability of the agreement itself.

Reports indicate the framework includes provisions related to Iran’s nuclear program alongside economic incentives tied to compliance. Similar issues have complicated negotiations in the past, and traders remain mindful that signing a document is not the same thing as restoring normal oil flows.

Still, the overall direction of the market remains clear.

The war-driven premium that dominated oil trading for much of the spring is rapidly fading. That shift carries significant implications beyond commodity markets.

Higher energy costs have been one of the biggest contributors to rising expenses for consumers this year. Gasoline prices surged above $4 per gallon nationally after the conflict began, increasing transportation costs and feeding broader inflation pressures across the economy.

As crude oil prices fall, gasoline prices have begun easing as well.

If energy supplies continue to normalize, additional relief could reach consumers in the weeks ahead, although local taxes, refining capacity and regional market conditions will determine how much drivers ultimately save at the pump.

Lower oil prices also benefit businesses that rely heavily on fuel.

Airlines, shipping companies, manufacturers and logistics firms all stand to gain from reduced energy expenses. Lower fuel costs can also help moderate inflation, easing some pressure on the Federal Reserve as policymakers continue monitoring price stability.

Not everyone benefits from cheaper oil, however.

U.S. shale producers generally earn less when crude prices decline, and prolonged weakness can lead companies to slow drilling activity and reduce investment plans. Industry analysts note that some producers become increasingly cautious as prices move toward the low-$80-per-barrel range.

The next major test for the market comes Friday when negotiators are expected to formally sign the agreement.

Vice President JD Vance said Monday that the administration expects the Strait of Hormuz to reopen and remain accessible to global shipping without tolls over the long term. The comments signaled Washington’s intention to support uninterrupted traffic through the critical energy corridor.

If the agreement holds and oil exports continue to increase, analysts believe prices could drift lower during the summer months.

For now, however, traders appear to be waiting for evidence rather than promises.

After months of conflict, supply fears and sharp market swings, investors have already priced in much of the optimism surrounding the agreement. The next move in oil prices may depend less on diplomatic announcements and more on a straightforward question: whether tankers begin moving through the Strait of Hormuz at levels approaching normal operations.

JBizNews Desk
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