Oil Prices Weaken Sharply as War Premiums Shrink
Oil prices fell sharply on Monday (June 15th) after the United States and Iran agreed to a temporary deal to end their months-long war. This agreement allows the Strait of Hormuz to reopen fully, easing concerns about supply disruptions that had previously rocked global energy markets.
Brent briefly fell 5.3% to below US$83/barrel, after closing at a three-month low last week. WTI also briefly weakened to below US$80/barrel. President Donald Trump said the US would allow the opening of Hormuz and end the blockade on Iran, with the strait scheduled to reopen after the agreement was signed on Friday.
Iran also confirmed the agreement through Deputy Foreign Minister Kazem Gharibabadi, although the official text will only be made public after the signing ceremony in Switzerland. This agreement marks the first step toward 60 days of negotiations on Iran's nuclear program, so the market still believes implementation risks have not been completely eliminated.
Fundamentally, the decline in oil reflects a reduction in the geopolitical risk premium. If Hormuz reopens and Persian Gulf oil flows recover, supply pressures could ease. The impact could reduce the risk of energy inflation and give central banks, including the Fed, room to be less aggressive in maintaining tight policy.
However, the full reopening of Hormuz still faces several obstacles. The mine clearance process, clarity on Iran's control over passing ships, and the potential restart of production from the Persian Gulf fields still require time. Producers also warn that a full supply recovery could take months due to technical, geological, and infrastructure-damaged challenges.
In the futures market, the Brent futures contract spread narrowed to less than US$1/barrel in backwardation, down significantly from over US$12 in April. This indicates the market is beginning to assess the easing of supply tightness, although the price structure has not yet fully turned bearish. The next focus will be the signing of the deal, the physical reopening of Hormuz, Persian Gulf export flows, and the direction of oil prices after the war premium begins to exit the market. (Arl)
Source: Newsmaker.id
