Oil drops as US–Iran deal targets Hormuz

The United States and Iran have signed a preliminary memorandum of understanding intended to end the Iran war and reopen the Strait of Hormuz. President Donald Trump said “the deal’s all signed,” while officials indicated that a formal signing ceremony is scheduled for Friday in Geneva. The memorandum has been signed by Trump, Vice President JD Vance and Iranian parliament speaker Mohammad Bagher Qalibaf, underscoring high-level political backing on both sides.

The agreement is described as preliminary, with details yet to be fully disclosed. It is intended as a step toward ending hostilities and restoring commercial shipping through one of the world’s most strategically important oil chokepoints. Both sides have signaled that further work is needed to translate the memorandum into a permanent truce and long-term security arrangement.

Iran’s semi-official Mehr news agency reported that the draft deal calls for reopening the Strait of Hormuz within 30 days under Iranian arrangements. This timeline, if implemented, would set a clear schedule for resuming tanker traffic through the narrow waterway that handles a significant share of global seaborne oil shipments.

Separately, U.S. officials said the agreement would extend an existing ceasefire and reopen the strait. The United States has indicated that the strait is expected to be toll-free for 60 days as part of the arrangements linked to this preliminary deal. These provisions are framed as interim measures pending negotiation of a more comprehensive, permanent truce.

Oil markets reacted immediately to the diplomatic progress. On June 15, Brent crude futures settled down $4.16, or 4.76%, at $83.17 a barrel, while U.S. West Texas Intermediate settled down $4.13, or 4.87%, at $80.75 a barrel. Both benchmarks ended the session at their lowest levels since early March.

The price moves reflect a rapid unwinding of some war-related risk premium built into crude benchmarks. Expectations that shipments through the Strait of Hormuz could resume, along with the prospect of reduced disruption to regional exports, contributed to the decline in futures prices. The settlement levels place both Brent and WTI near three-month lows.

In parallel with the diplomatic and market shifts, the National Iranian Oil Company changed its pricing strategy for Asian customers. The company lowered the official selling price for its light crude grade for Asian buyers to $7.15 a barrel above the Oman/Dubai average for July. This compares with a previous premium of $13 a barrel.

The reduced premium suggests an effort to keep Iranian crude competitive in a market anticipating improved supply flows through the Gulf. The adjustment directly affects term contracts linked to the Oman/Dubai benchmark and is significant for refiners in key Asian importing countries. Together with the move in futures prices, it highlights how producers and buyers are repositioning amid expectations of a partial normalization in Gulf exports.