Brent Drops Below $100 Amid Optimism for US-Iran Agreement

SadaNews - Oil prices have declined as the United States and Iran are nearing an agreement, despite President Donald Trump stating that the US blockade on the Strait of Hormuz will continue until the agreement is finalized.

Brent crude, the global benchmark, fell by up to 6.2% to $94 per barrel, while West Texas Intermediate crude approached $91. Trump stated on social media that he would not "rush" into an agreement that "has not been fully negotiated yet." Senior American officials have added that any final agreement could take several days.

US Secretary of State Marco Rubio adopted an optimistic tone on Monday, stating that the United States will give diplomacy every chance to succeed, and that the agreement is still being worked on. He told reporters in New Delhi: "We thought we might get some news last night." He added: "Maybe today, but I won’t exaggerate about it."

However, it remains unclear how major disagreements, including the fate of the Iranian nuclear program, will be addressed. The Iranian agency "Tasnim" reported that the draft agreement might collapse due to the United States obstructing some key provisions, including the demand for the release of frozen Iranian assets.

Charu Chanana, Chief Investment Strategist at Saxo Markets in Singapore, pointed to sanctions and the nuclear program, stating: "The two sides may be closer to a framework for a ceasefire and reopening the Strait of Hormuz, but they are still far apart on the tougher issues." She added that the market has priced in relief for oil, but has not priced in a permanent solution.

Global energy markets have experienced significant disruptions due to the crisis that began in February when the United States and Israel attacked Iran. The conflict quickly spread across the Gulf region, forcing producers to halt millions of barrels of daily oil supplies. The Strait of Hormuz—linking the region to global markets—has been under double blockade from Tehran and Washington.

The drop in Brent crude on Monday marks the fourth decline in five sessions, with futures heading for their lowest closing level in over a month. In energy markets, the price of European natural gas also fell by up to 6.3%.

Optimism for Ending the War

Kharis Khourshid, Chief Investment Officer at Karobaar Capital LP based in Chicago, said: "A large part of the oil was trading based on assumptions of worst-case scenarios for weeks."

He added: "But once it became clear that talks are still ongoing and escalation is not accelerating, a large part of the fear premium is dissipating very quickly."

The full reopening of the Strait of Hormuz—which in peacetime accounted for about one-fifth of the world’s oil and liquefied natural gas—would be a breakthrough for energy importers in Asia, including China, Japan, and South Korea.

However, traffic through the strait remains at a tiny fraction of pre-war levels, although a few ships have managed to pass. Among them is a giant tanker carrying Iraqi oil to China, which left the Gulf and crossed the US blockade line, according to ship tracking data. It also appears that three liquefied natural gas tankers left the region in recent days.

Iran claimed that 33 ships, including oil tankers and container ships, crossed the strait after obtaining permission from the Iranian Revolutionary Guard Navy, according to the Tasnim agency on Sunday. In response, Trump’s administration stated that any system of crossing fees is unacceptable.

The Washington Post reported that the US and Iran have laid out a memorandum of understanding to extend the ceasefire for 60 days while both sides seek a permanent agreement. If agreed upon, any mines planted in the strait will be removed, and it will be reopened during that period, according to the newspaper.

Internal Political Pressure on Trump

President Trump is facing increasing internal political pressure to end the conflict, especially ahead of the midterm elections in November that will determine control of Congress. The war has led to rising fuel costs, with average gas prices in the United States reaching their highest levels since 2022.

Kevin Hassett, Trump’s chief economic advisor in the White House, told Fox News on Sunday that he expects energy prices to decrease once an agreement is reached, potentially providing the Federal Reserve room to cut interest rates. He added: "We expect energy prices to drop as soon as an agreement is reached."

Meanwhile, Russia and Ukraine have exchanged attacks on energy infrastructure. Ukraine targeted the "Shiskharis" oil terminal, the largest on Russia's Black Sea coast, along with a storage facility and a major petrochemical complex. In turn, the Ukrainian state energy company Naftogaz stated that Russia targeted oil and gas facilities in eastern Ukraine.

Oil trading may be quieter than usual on Monday, as some traders are away from work due to public holidays in the United States and the United Kingdom.

In the latest transactions, Brent crude contracts for July fell 5.7% to $97.69 per barrel as of 11:44 AM Singapore time, and US West Texas Intermediate crude contracts dropped 5.9% to $90.89 per barrel.