WTI dropped 5.61% to $80.03 a barrel by Monday’s early European session — the first sub-$80 print since March — after President Trump declared on Truth Social that “The Deal with the Islamic Republic of Iran is now complete,” adding “Ships of the World, start your engines.
Let the oil flow!” Some analysts cited by CNBC have cautioned that the market may be underestimating the operational challenges associated with restoring supply flows.
The deal, confirmed by Pakistan Prime Minister Shehbaz Sharif — who served as mediator — calls for the Strait of Hormuz to reopen without a toll system and for the U.S. to end its naval blockade of Iran.
The official signing ceremony is scheduled for Friday in Switzerland. Brent for August delivery fell 5.16% to $82.82, with the Stoxx 600 Energy Sector off 2.3% at the European open and the FTSE 100 Energy Sector down 4%, with BP shedding 3.8% and Shell 3.7%, according to CNBC’s Spencer Kimball and Lee Ying Shan.
Equities read the opposite way. Dow futures added 440 points (0.9%), S&P 500 futures climbed 1.14%, and Nasdaq 100 futures popped 1.79%. In Asia, South Korea’s Kospi led with a 5.56% surge; Japan’s Nikkei 225 added 4.90%. The risk-on bid was real. The crude repricing may have overshot.
The Strait Reopens, But Supply Normalisation May Take Time
The market is treating a geopolitical announcement as an operational reality. It isn’t — not yet.
Daniel Hynes, senior commodity strategist at ANZ, told CNBC’s Access Middle East that the energy shock is “far from over,” and that shipping traffic through Hormuz returning to pre-conflict levels is not something he foresees for the foreseeable future.
“The difficult phase is ahead of us. It’s going to be a very, very challenging recovery process.” — Daniel Hynes, ANZ, CNBC
The reasons are structural, not political. Hynes flagged three: heavy drawdowns on global oil inventories during the four months Hormuz was effectively closed; mines still present in the Strait requiring clearance before safe transit; and the maintenance and repair backlog on ships stranded in the region during the conflict. “I suspect it could take weeks, if not a month or two,” he said.
Westpac, in a note cited by CNBC’s Hugh Leask and Justina Lee, put the inventory problem bluntly: global oil stocks, depleted by the prolonged Hormuz closure, “will need time to be rebuilt and are likely to fall further before new supplies begin to arrive from the Gulf.” The bank added that “the devil remains in the detail and hence uncertainty is likely to remain elevated.”
Hynes’ assessment differs from the market reaction seen on Monday. He stated that, in his view, oil prices around $80 may not be sufficient to rebalance market conditions over the next three to six months. The market, he said, “is oversimplifying things.”
800 Million Barrels and What It Means for the Rest of 2026
Bart Melek, global head of commodity strategy at TD Securities, made the inventory math explicit on CNBC’s Squawk Box Asia: even if flows through Hormuz normalised immediately — a heroic assumption given the mine-clearance timeline — 800 million barrels of inventories into November would still likely be lost.
“The market is quite relieved that we’re having a deal, but I think we’re not out of the woods yet.” — Bart Melek, TD Securities, CNBC
Melek added that higher oil prices remain “very much in the cards and all the inflationary implications that brings along,” with one partial offset: if China opts to stop drawing on its strategic reserves at some point, it could prevent the most severe price spikes. That’s a conditional — not a given.
The inflationary read matters beyond crude itself. Willem Sels, Global Chief Investment Officer at HSBC Private Bank and Premier Wealth, told Squawk Box Asia that the economic effects of the Middle East conflict have already begun hitting “the most vulnerable parts of the economy,” with “challenging economic data, especially from countries in South Asia” adding another source of potential volatility.
For equity markets, the cross-asset logic cuts two ways. Energy producers — BP, Shell, the broader FTSE 100 energy weighting — took the day’s hit on the peace-deal relief trade. If crude prices were to recover as some analysts anticipate, energy-sector companies could experience different market dynamics than those observed immediately following the announcement. Airlines and logistics names, who faced fuel-cost pressure through the Hormuz closure, get the near-term relief on lower spot crude, but the structural drag on inventories means the relief could be shorter-lived than the equity moves suggest.
What The Frontline CEO Said Last Week
One piece of sourced colour from the days before the deal: Lars Barstad, CEO of oil tanker company Frontline, told CNBC the week prior that he was “actually very optimistic the minute the tide turns and the U.S. and Iran have found some sort of agreement, at least not to attack shipping, that those transits are going to resume pretty quickly.” Barstad’s optimism was conditional — “not to attack shipping” is a lower bar than full mine clearance and fleet repair. His framing was about the pace of resumption, not about inventory rebuilding or the risk premium that persists in the market.
The distinction matters. Fast transit resumption and fast supply normalisation are different timelines, and the market appears to have priced in the former while discounting the latter.
The Genuine Bear Case for a V-Shaped Recovery in Crude
The scenario where $80 holds and the market doesn’t revisit the $90s rests on a few variables. First, if OPEC+ chooses to fill the supply gap aggressively rather than defend price. Second, if China’s demand picture deteriorates materially — Sels’ point about South Asian economic stress extends to broader EM demand softness. Third, if the peace agreement’s technical implementation is faster than the most optimistic mine-clearance estimates allow.
According to analysts cited in this article, these scenarios are currently viewed as less likely than the supply-constrained outlook. Hynes argues that a geopolitical risk premium may continue to influence crude prices even after the immediate supply disruption subsides.
What’s Next
- Strait of Hormuz formal peace signing ceremony — scheduled for Friday (as stated by President Trump on Truth Social, per CNBC). Mine-clearance technical talks to begin this week following facilitation meetings.
- EIA Weekly Petroleum Status Report — EIA — inventory data will be the first hard read on how deeply Hormuz-related drawdowns have cut into U.S. crude stocks.
- Federal Reserve communications — Fed calendar — with oil’s inflation implications in play, market participants may monitor any Federal Reserve commentary regarding the potential impact of energy prices on inflation expectations and monetary policy.
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