Oil Prices Crash as Traders Bet the War Is Over
The oil market just did something remarkable.
Brent crude futures fell below $79 per barrel on Tuesday, its lowest level since March, after the United States and Iran digitally signed a peace agreement that includes the reopening of the Strait of Hormuz and the immediate return of Iranian oil sales to global markets.
The selloff has been relentless.
Brent is now down more than 33% over the past month, while WTI has plunged to the mid-$70s. A market that spent the spring obsessing over missing barrels is now worried about just how quickly those barrels might come back.
And there could be a lot of them.
Under the agreement, Iran will be allowed to immediately resume oil and fuel sales, according to the WSJ, along with the banking, insurance, and shipping services needed to move those cargoes. The deal effectively reconnects one of the world’s largest oil producers to global energy markets overnight.
The market is also betting that traffic through Hormuz will normalize, easing fears over a chokepoint that normally handles roughly a fifth of global oil flows.
The speed of the decline highlights just how much of crude’s rally had become tied to geopolitical risk.
Yet there is a catch.
Inventories remain depleted after months of disrupted flows, and many analysts continue to warn that the market’s buffers have been drawn down significantly. Even with a peace agreement in hand, restoring production, exports, and shipping routes is not as simple as flipping a switch.
For now, however, traders aren’t waiting around for proof. They’re trading as if the war premium is already gone.
Source: Oilprice.com
