Crude oil prices extended loss to an over three-month low on Monday as geopolitical risk premiums evaporated following an overnight interim agreement between the US and Iran to halt the war.
The Brent futures contract declined 4.5% at $83.40 per barrel, a level not seen since March 10. Murban futures closed at its lowest since March 5 at $83.02/bbl on June 12 and were not trading by the time of publication of this oil price update.
"Oil prices slumped further after the US and Iran agreed to an interim deal aimed at ending the war, paving the way for the reopening of the Strait of Hormuz," Saxo Bank analysts noted.
The sharp Monday selloff builds on a volatile previous week where global crude benchmarks lost over 5% on a weekly basis due to building peace talk momentum.
"Brent crude traded near $83.50 per barrel as traders braced for a surge in supply from tankers stranded in the Persian Gulf and now preparing to transit the Strait," Saxo Bank analysts added.
Under the interim accord, the US will lift its maritime blockade, allowing the critical Strait of Hormuz to reopen.
Traders are currently bracing for a near-term surge in supply as nearly 600 vessels including roughly 127 laden oil tankers currently idled inside the Persian Gulf prepare to transit the waterway.
However, analysts from ANZ and Saxo Bank noted that while dozens of ships are positioned to move immediately, physical relief to regional production will lag until empty vessels can return to the Gulf.
Despite the bearish price action, analysts urge caution as significant market ambiguities remain.
With US President Donald Trump warning that hostilities could resume if the nuclear talks fail, SEB analysts highlighted that while Brent has dropped to the $83 mark, prices still remain structurally higher than the pre-war baseline of roughly $70 per barrel.
Officials are scheduled to formally sign the pact in Switzerland this Friday.