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EMEA Oil Update: Crude Tumbles as Markets Weigh Hormuz Reopening Prospects

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EMEA crude futures retreated in after-hours trading on Monday as markets assessed a tentative US-Iran peace agreement that could pave the way for the reopening of the Strait of Hormuz, boosting expectations for a revival in supply.

Brent crude futures plunged 5.4% to $78.72 per barrel, while Murban crude futures were down 6.9% to $71.87/bbl.

Soojin Kim, research analyst at MUFG, said that optimism surrounding a gradual recovery in Gulf exports has reduced the geopolitical risk premium built up during the conflict.

Kim said physical crude markets also weakened, with the Dubai and Murban forward curves shifting into contango for the first time since the outbreak of the Middle East conflict, signaling easing fears over immediate supply shortages.

The US-Iran interim peace deal to end the conflict is set to extend the ceasefire for 60 days and reopen the Hormuz to all commercial vessels, according to media reports.

President Trump said upon arrival in France on Monday that the peace deal with Iran has been signed, adding that the Strait will "completely reopen" on Friday, free of Iranian tolls. The US President said a formal signing ceremony would take place on Friday in Geneva.

Though market participants have welcomed the prospect of increased crude flows via the Strait of Hormuz, RBC Capital Markets analysts said the operational challenges of reopening the Strait could take months to resolve.

Kpler analysts said there are about 118 laden tankers trapped in strategic waterways. However, though the vessels could leave within 10-15 days, the analysts said they could deliver an early spike in transits without boosting regional production.

Meanwhile, though uncertainty remains over the timing and practical implementation of the agreement, oil flows through Hormuz have already begun to recover before the deal announcement.

On the supply front, the US will reportedly also allow Iran to immediately begin selling oil and fuel under the memorandum of understanding between the two sides, reached to end the conflict.

Trump said Russia should make peace with Ukraine, and that he would try to help, according to media reports. A settlement in the Ukrainian war could result in the lifting of some sanctions on Russia, allowing Moscow to export more crude.

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