Oil futures hit a more than three-months 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 4.8% at $83.11 per barrel, a level not seen since March 10. Murban futures dipped to its lowest since March 4 at $77.58/bbl.
"Signs of progress toward a peace deal in the Middle East pushed crude oil prices to their lowest level since early March," ANZ analysts said.
The sharp Monday selloff builds on a volatile previous week where global benchmarks lost on a weekly basis on building peace talk momentum.
On Monday "Oil prices slumped further after the US and Iran agreed to an interim deal aimed at ending the war, paving the way for the reopening of the Strait of Hormuz," Saxo Bank analysts noted.
"Brent crude traded near [$]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, energy 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.