Oil prices tumbled on Monday after the United States and Iran announced an initial agreement to wind down their war and reopen the Strait of Hormuz, the waterway that has been largely shut since late February.
WTI crude fell 4.36% to $81.33 a barrel, while Brent dropped 4.42% to $83.63. Both benchmarks are now trading near their lowest levels since the conflict began on February 28, a sharp turn for a market that was bracing for fuel shortages just a week ago.
The mood has flipped fast. As recently as last week, crude was rallying after Iranian strikes on Kuwait revived fears that the Gulf would stay bottled up for months. Monday's news rewrote that story in a single session.
What's in the deal
Under the framework, the two sides would extend their fragile ceasefire and restart commercial traffic through Hormuz once the agreement is signed. Pakistan, acting as mediator, said the signing is set for Friday in Geneva. Until pen hits paper, nothing changes on the water.
President Donald Trump authorized the announcement, and Iran's deputy foreign minister, Kazem Gharibabadi, confirmed Tehran's role in the talks. Negotiators have given themselves a 60-day window to settle the hardest question of all: the future of Iran's nuclear program, which remains unresolved.
The strait matters because of what moves through it. Before the war, it carried close to 20% of the world's traded oil and liquefied natural gas. Its closure choked exports from Saudi Arabia, Iraq, Kuwait and the UAE, and at the peak it drove Brent above $125.
Why the crisis won't clear overnight
Traders sold first and asked questions later, but a signature on Friday won't instantly refill the global supply chain. Tankers have to be rerouted, war-risk insurance rewritten, and Gulf producers need time to bring back the barrels they shut in. Officials and analysts cited in the reporting expect the crunch to ease over months, not days.
Refined fuels are even slower to heal. Diesel and jet fuel have absorbed the worst of the shock, and those markets tend to lag crude on the way back down.
The deal could also slip. Israel's defense minister, Israel Katz, has signaled his troops will remain for the foreseeable future in territory seized during the fighting, and Tehran has tied any lasting settlement to an end to the conflict in Lebanon. Neither point is close to resolved.
What to watch
For now, money is moving on the headline. Gold was Monday's biggest gainer, up 2.31%, a sign that some investors still want a hedge in their back pocket. Natural gas went the other way, edging up 1.27% to $3.16.
The real test comes Friday. If the deal is signed and the first tankers queue up to cross Hormuz, the sell-off may have more room to run. If it collapses, the more than $40 a barrel that crude has shed since its wartime peak could come rushing back.