US Oil Update: Crude Slides on Iran Deal Progress, Analysts Caution on Supply Outlook
Crude futures extended losses in after-hours trading on Monday as traders assessed the implications of a US-Iran agreement for global oil supplies.Front-month West Texas Intermediate crude futures fell 4.38% to $81.16 per barrel, while Brent futures declined 4.56% to $83.35/bbl.US President Donald Trump said the deal with Iran is "all signed, and the Strait is already partially opened," adding that the waterway will be fully operational by Friday. The official signing is expected to take place in Switzerland on Friday.Trump made the remarks in a bilateral meeting with French President Emmanuel Macron at the G7 Summit in France.Trump said he expects the details of the memorandum to be released after it is officially signed on Friday.In a post on X, Iranian President Masoud Pezeshkian said the memorandum reflects months of negotiations and could become a source of national pride if both sides fully implement its provisions.Pezeshkian described the arrangement as an initial step toward ending the conflict and beginning broader negotiations, while emphasizing that a final agreement has not yet taken shape and that Iran remains prepared for all possible outcomes.European governments continue preparing for a potential mine-clearing mission in the Strait of Hormuz, with more than 15 countries reportedly offering personnel and equipment to support the effort.Lebanon has emerged as a key component of the broader agreement, with several leaders arguing that any lasting settlement must address ongoing tensions between Israel and Hezbollah.French President Emmanuel Macron and German Chancellor Friedrich Merz said the arrangement should help support peace in Lebanon, while Trump said, "We want to see if we can resolve the issue of Lebanon."Analysts cautioned that even if the agreement moves forward, the recovery in shipping activity and commodity flows is likely to take longer than the diplomatic process itself.Sheel Bhattacharjee, head of freight pricing at Argus Media, said shipping companies continue to prioritize security over speed, with many operators unwilling to return vessels until confidence in the region improves. Bhattacharjee added that doubts remain over a sustained recovery in traffic through the waterway.Francis Osborne, head of oil analytics at Argus Media, said reopening the Strait of Hormuz alone will not quickly restore commodity flows, with Argus Consulting's Oil Fundamentals Outlook estimating that regional crude production could take four to six months to recover to pre-crisis levels.Cyril Widdershoven, senior advisor at Blue Water Strategy, said tanker movements could rebound within weeks of a successful agreement, but shipping constraints, insurance reviews and security assessments will likely delay a return to pre-crisis volumes for several months, with elevated risk perceptions potentially lasting into 2027.Claudio Galimberti, chief economist at Rystad Energy, said improved sentiment alone will not eliminate supply disruptions, as production ramp-ups, logistics normalization and the unwinding of crude's risk premium will take time.Galimberti added that the agreement represents an important step forward but remains "a step rather than a destination."