Oil prices fell sharply on Monday after the United States and Iran reached a preliminary agreement to end months of conflict and reopen the Strait of Hormuz.
Brent crude, the international benchmark for oil prices, dropped more than 4 percent to around $83.80 per barrel, while U.S. West Texas Intermediate (WTI) crude declined nearly 5 percent to approximately $80.80 per barrel.
The selloff pushed both benchmarks to their lowest levels since March as traders moved to unwind the geopolitical risk premium that had supported prices in recent months.
The decline followed announcements from U.S. and Iranian officials that both countries had agreed on a framework aimed at ending hostilities and reopening the Strait of Hormuz, a critical shipping route that handles roughly one-fifth of global oil flows.
The preliminary agreement is expected to be formally signed later this week in Switzerland.
Market participants welcomed the development as a major step toward restoring stability to global energy markets. The prospect of uninterrupted oil shipments through the Strait of Hormuz significantly reduced fears of supply shortages that had previously driven crude prices above $100 per barrel during the height of tensions.
The easing of geopolitical tensions also boosted investor sentiment across global financial markets. European stocks rallied to record highs, while airline and travel stocks gained on expectations of lower fuel costs.
Energy stocks, however, came under pressure following the decline in crude prices.
Analysts noted that the market is rapidly repricing oil as the likelihood of major supply disruptions diminishes. While the agreement remains subject to formal approval and implementation, traders are increasingly betting that additional barrels could return to global markets if the peace process holds.
The latest development comes amid growing concerns over global oil demand. Last week, OPEC lowered its 2026 oil demand growth forecast for the second consecutive month, citing weaker economic activity and softer consumption trends.
Combined with expectations of improved supply conditions, the demand outlook has added further pressure on crude prices.
For oil market participants, attention will now shift to the formal signing of the agreement, the timeline for the reopening of the Strait of Hormuz and any response from OPEC+ should prices continue to weaken.
The sharp decline in crude prices underscores how quickly geopolitical developments can influence global energy markets. If the agreement is successfully implemented, analysts expect oil prices to remain under pressure as supply concerns ease and the market refocuses on demand fundamentals.
