lined sharply on Monday after US-Iran talks in Switzerland concluded with Tehran announcing it had secured waivers for oil and petrochemical exports, easing fears of a global supply shortage. Brent crude fell $1.68, or 2.09%, to $78.89 a barrel by 0633 GMT, reversing early gains that had pushed prices as high as $82.30 at the open.
US West Texas Intermediate crude futures settled at $76 a barrel, down 60 cents, ahead of the contract’s expiry later on Monday. The more active August contract fell 69 cents to $75.16 a barrel. There was no US market settlement on Friday due to a public holiday.
Diplomatic Breakthrough Drives Selloff
The decline was driven by improving prospects for a diplomatic resolution between Washington and Tehran. High-ranking US and Iranian officials wrapped up their first round of talks in Switzerland on Monday, according to mediators, under the terms of a memorandum of understanding reached last week. The agreement extended a tenuous ceasefire from April for at least another 60 days.
Iranian Foreign Minister Abbas Araqchi said Tehran had secured waivers for oil and petrochemical exports, the release of some frozen assets and the launch of a reconstruction and development plan for Iran.
“The decline has been driven primarily by improving prospects for a diplomatic breakthrough between the United States and Iran, reviving hopes that sanctions on Iran could eventually be eased,” said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.
Sachdeva added that such a development could allow nearly 1.5 million barrels per day of Iranian crude to return to international markets, significantly improving global supply availability at a time when demand growth remains moderate.
Strait of Hormuz Closure Had Rattled Markets
Trading had opened on a volatile note before the US-Iran talks in Switzerland concluded. Iran had announced it closed the Strait of Hormuz again, citing Israeli and US violations of the interim peace deal. Shipping data showed the number of vessels passing through the strait fell sharply on Sunday following the announcement.
The closure threat, combined with US President Donald Trump’s warnings of military action against Iran and threats to take control of its energy infrastructure, had initially sent Brent crude surging to $82.30 at the open.
Israeli strikes in Lebanon killed at least 20 people on Saturday, Lebanon’s state news agency NNA reported, one day after a ceasefire with Hezbollah took effect. The violence added to early market jitters before diplomatic progress calmed sentiment.
Supply Picture Improving Across the Region
Beyond the Iran deal, broader supply conditions have improved considerably. Oil prices had already fallen more than 8% last week on hopes of more supply from the release of cargoes stranded in the Gulf and the potential lifting of US sanctions on Iranian oil.
Over 25 million barrels of Iranian oil have passed through the virtual blockade line since Monday, the head of the National Iranian Oil Company, Hamid Bovard, told state TV on Sunday.
Other regional producers have also moved to increase supply. The United Arab Emirates, Kuwait and Iraq all offered more oil to customers in the past week. Iraq plans to restore crude production gradually to between 4.2 million and 4.3 million barrels per day, according to the country’s deputy oil minister for upstream affairs.
Risks Remain Despite Ceasefire
Despite Monday’s price decline, analysts cautioned that the path toward a permanent deal remains uncertain. “Recent developments show that moving towards a more permanent deal will be challenging, with very real risks of a flare-up in hostilities during the 60-day ceasefire,” ING analysts said in a note.
The fragility of the ceasefire, ongoing Israeli military activity in Lebanon and the broader regional tensions mean that oil markets could face renewed volatility if diplomatic progress stalls or hostilities escalate.