WASHINGTON (dpa-AFX) - After ending last Friday with two consecutive sessions of losses, on Monday crude oil prices have gone for a tailspin after the U.S. and Iran announced reaching an agreement to discuss ways to end their mutual conflict. The framework allows immediate resumption of free flow of oil and energy trade via the Strait of Hormuz.
WTI Crude Oil for July month delivery was last seen trading down by $4.31 (or 5.08%) at $80.57 per barrel.
In a significant development impacting oil markets, the U.S. and Iran announced that both have reached an agreement to end their more than 100 days of war which began on February 28.
Last week, U.S. President Donald Trump assured that a preliminary deal with Iran to bring their conflict to an end would be signed over the weekend.
On Sunday, through Truth Social, Trump messaged that negotiations on a deal with Iran was complete and an agreement would be signed on Friday. Iran's Deputy Foreign Minister Kazem Gharibabadi reaffirmed that a deal had been reached.
Gharibabadi stated that the content of the Memorandum of Understanding would be released following a signing ceremony in Switzerland, which will be hosted by Pakistan. Of note, Pakista acted as an intermediary along with Qatar to secure a deal.
Trump authorized the toll-free opening of the Strait of Hormuz as well as the lifting of the naval blockade he had earlier imposed on ships traveling to and from Iranian ports.
Trump added that after removal of the sea mines laid by Iran during the conflict, traffic will flow freely across the strait. Trump claimed that the deal was an achievement which his predecessors could not accomplish.
In an interview with the New York Times, Trump cautioned that if Iran fails to reach an accord with the U.S., he would restart the attacks on Iran and make the U.S. a guardian of the Middle East in return for 20% of the region's revenues.
Today, confirming the smooth reopening, Trump messaged that ships are starting to move, many loaded with oil.
Though the full text of the Memorandum of Understanding is yet to be revealed, preliminary reports indicate that the agreement was aimed to ensure quick reopening of the Strait of Hormuz and to leave the other crucial issues for discussions during the now extended 60-day period of ceasefire.
The critical sticking points include unfreezing of Iran's assets from foreign countries, lifting of U.S. sanctions on Iranian exports, the Israel-Lebanon conflict, and Iran's nuclear ambitions as well as removal of weapons-grade uranium from Iran.
In an interview with CNBC, U.S. Vice President JD Vance stated that a lot of other details have been pushed to future talks but optimistically stated that the U.S. has all the cards. Vance also stated that the strait would remain toll-free in the long-term.
Iran's Foreign Ministry spokesperson Esmail Baghaei stated that Iran would not seek to collect tolls on ships transiting the strait.
After impatiently waiting for weeks to hear positive news on the reopening of the crucial waterway, today, crude oil prices nosedived with the easing of supply-disruption concerns.
Globally, stock markets responded positively to the announcement.
With oil-linked inflationary pressure showing symptoms of easing, the U.S. dollar index was last seen trading at 99.58, down by 0.16 points (or 0.16%) today.
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