Oil Drops to Three-Month Low, US-Iran Deal Cuts Risk Premium
Oil prices closed sharply lower on Monday (June 15) after President Donald Trump announced that the United States and Iran had signed a memorandum of understanding to end the Iran war and reopen the Strait of Hormuz. This news caused the market to unwind some of the war risk premium that had supported energy prices over the past few months.
Brent crude closed down US$4.16, or 4.76%, to US$83.17/barrel, while WTI fell US$4.13, or 4.87%, to US$80.75/barrel. Both contracts recorded their lowest closes since March 4, reflecting expectations that supply disruptions from the Gulf region could begin to ease if the Strait of Hormuz is reopened.
A US official said the memorandum had been signed by Trump, Vice President JD Vance, and Iranian Parliament Speaker Mohammad Bagher Qalibaf. The official signing ceremony is scheduled for Friday in Geneva. Meanwhile, Iran's semi-official Mehr news agency reported that the draft agreement calls for the reopening of the Strait of Hormuz within 30 days under Iranian control.
The oil decline was also reinforced by the prospect of additional supply. Iran lowered its official selling price for light crude for Asian buyers to US$7.15/barrel above the Oman/Dubai average for July, significantly lower than the previous month's premium of US$13/barrel. This move signals that Tehran is prepared to boost export volumes again if logistical channels and sanctions begin to ease.
Fundamentally, market transmission moves through supply and inflation channels. If Hormuz reopens and Iranian exports increase, global supply pressures could ease, energy prices weaken, and inflation risks also decline. This could potentially reduce pressure on the central bank to maintain tighter monetary policy.
However, the market will still be testing the implementation of the agreement. The next focus will be on the details of the Hormuz reopening, the response of shipping and insurance companies, the flow of Iranian exports, and whether the official signing in Geneva proceeds smoothly. As long as technical certainty is not complete, oil volatility could persist even if the war premium begins to shrink.
Source: Newsmaker.id
