Key Takeaways
- Oil prices fell Monday after the US and Iran struck a peace deal to end their months-long war.
- Brent crude and WTI oil prices slipped around 5% to hover close to USD 80.
- Oil and gas stocks also fell after a record run over recent months.
Oil prices tumbled Monday after the US and Iran agreed a peace deal to halt their three-and-a-half month war and resume trade through the Strait of Hormuz.
Brent crude oil prices slipped 5% to USD 83 per barrel after markets reopened overnight, with prices now just USD 12 higher since the US-Israeli attacks on Iran started in late February. West Texas Intermediate crude oil prices were down 5.3% to USD 80.
Oil and gas stocks also fell on news of the deal after rallying to record highs over recent months, as damage to Gulf production facilities and constrained supplies. TotalEnergies TTE led losses, shedding almost 9%, while European energy heavyweights BP BP, Shell SHEL and Eni ENI all fell around 4%.
While oil prices eased over recent weeks on rising hopes of a peace deal, whether they can fall further will depend on several factors. Those include “the pace at which commercial and strategic stockpiles are replenished, how quickly shut-in production can be brought back online, and the extent of any lasting demand destruction caused by a prolonged period of elevated energy prices,” according to Saxo Bank analysts.
“The speed at which supply chains normalize and export flows recover will also play a key role in determining how much of the geopolitical risk premium remains embedded in the market,” the analysts add.
At the height of the conflict, Brent oil prices spiked to around USD 118 per barrel. Energy companies, meanwhile, posted bumper first quarter profits as the war rattled global supplies.
US President Donald Trump said Sunday night that a deal between Washington and Tehran was “now complete,” without stating the precise terms. The comments came after Pakistani Prime Minister Shehbaz Sharif, whose country has served as a mediator, announced that a deal had been struck, writing in a post on X that the deal called for “the immediate and permanent termination of military operations on all fronts, including in Lebanon.”
A memorandum of understanding is scheduled to be signed on Friday in Switzerland.
“Oil stocks are getting hit this morning, but after such a strong run investors have already banked strong gains here,” says Morningstar’s chief European markets strategist Michael Field. However, he notes that investors are likely to remain cautious until further details of the deal are revealed.
“Like tariff announcements, the market has become accustomed to taking announcements like this with a pinch of salt, adopting a ‘believe it when I see it’ attitude. It’s likely markets will rise today, but with equities already close to all-time highs I wouldn’t expect a massive continued rally,” he says.
