Crude oil prices dropped sharply on Sunday evening after President Trump announced on Truth Social that a peace deal with Iran had been completed and that the Strait of Hormuz, the vital waterway through which 20 percent of the world's oil and liquefied natural gas passed before the war began, would reopen immediately to toll-free shipping. Brent crude fell 3.6 percent to $84.21 per barrel.
West Texas Intermediate dropped more than 4 percent to $81.38 per barrel, its lowest level since early March. Both benchmarks had already fallen more than 6 percent last week as diplomatic momentum toward the deal became visible to markets.
Trump's Truth Social announcement carried the specific energy of a deal he was proud of. "The Deal with the Islamic Republic of Iran is now complete. Congratulations to all! I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!"
Pakistani Prime Minister Shehbaz Sharif, who served as a key mediator in the negotiations, announced the deal simultaneously on X. "Following intensive talks, we are pleased to announce that the Peace Deal between the United States of America and the Islamic Republic of Iran has been REACHED. Both sides have declared the immediate and permanent termination of military operations on all fronts, including in Lebanon."
Iran's Deputy Foreign Minister Kazem Gharibabadi confirmed the agreement on the Iranian side. A formal signing ceremony is scheduled for Friday June 19 in Switzerland.
What Does The New Deal Entail?
The agreement is a 14-point memorandum of understanding that establishes a 60-day ceasefire framework designed to transition into a permanent end to hostilities within that window.
The terms that take effect immediately are the most consequential for global energy markets, the Strait of Hormuz reopens to international shipping today, and the United States simultaneously lifts its naval blockade of Iranian ports.
Both sides declared an immediate and permanent end to military operations, including operations in Lebanon where the conflict had extended.
What the deal does not resolve is the issue that caused the war in the first place: Iran's nuclear program.
The 14-point memorandum leaves nuclear questions to be negotiated over the next 60 days. The US and Iran have given themselves that window to reach a technical agreement on how to down-blend Iran's stockpile of highly enriched uranium and establish a framework for freezing and monitoring its nuclear program going forward. Sanctions relief and access to Iranian funds frozen under existing sanctions are tied to progress on those nuclear negotiations, the US incentive structure designed to keep Iran engaged in the post-deal technical talks.
Iran's Supreme National Security Council asserted, as it did after the April ceasefire, that it had achieved its core objectives.
The US insisted Iran was incentivized to complete the nuclear talks because of the financial benefits attached to compliance. Both characterizations can be simultaneously true in diplomatic agreements, and frequently are.
Why Oil Prices Have Further To Fall
The 4 percent decline Sunday is real and significant. It is also incomplete. Before the war began on February 28, Brent crude was trading in the $65-70 per barrel range.
At $84 on Sunday evening, oil has fallen considerably from its war-peak levels, Brent hit $108 briefly in late March before the April ceasefire brought it down to the low $90s, but remains approximately 20 to 25 percent above pre-war prices.
The reason oil has not collapsed all the way to pre-war levels on the deal announcement is the physical reality of what the Strait of Hormuz looks like right now.
Iran effectively took control of the waterway shortly after the war began and used it as leverage throughout the conflict, restricting traffic in ways that created fuel shortages in parts of Asia and disrupted global supply chains across three and a half months of war.
In addition to the supply disruption, Iran laid mines in the strait during the conflict, an unknown number, at unknown locations, across a body of water through which some of the world's largest oil tankers are expected to begin moving immediately.
The G7 summit that begins Monday will include discussions about the demining operation needed to make the strait safely navigable for commercial shipping at full capacity. The UK's Prime Minister Keir Starmer said Sunday that resources for a demining operation are in place and ready to be deployed.
The United States and France have also indicated interest in supporting demining once the conflict is formally concluded. How long the demining operation takes and how quickly tankers can transit safely will determine how fast the energy shock that has been visible in every American's gas bill since March actually reverses.
Energy experts quoted by the Associated Press Sunday evening offered a blunt assessment: "Oil and gas supplies could take months to return to normal after Iran deal." The deal opens the door.
The physical work of clearing mines, restoring tanker routing confidence, rebuilding supply chains across Asia and reversing the energy shock that has pushed US gasoline prices to their highest levels since 2022 is measured in months, not in the hours between Sunday's announcement and Monday's futures market open.
The Inflation Picture That Is About To Change
The Iran War has been the dominant economic story of 2026 in ways that the stock market and GDP numbers do not fully capture but that every household budget does.
The May 2026 CPI report released on June 10 showed annual inflation at 4.2 percent, the highest since April 2023, with energy prices accounting for more than 60 percent of the monthly increase.
Gasoline was up 40.5 percent annually. Fuel oil was up 58.9 percent. Those numbers are the Strait of Hormuz visible in the consumer price index.
If the deal holds and the Strait reopens fully over the coming weeks, the energy component of the CPI will begin reversing those extraordinary year-over-year comparisons.
The Federal Reserve, which has been on hold throughout 2026 with no rate cuts expected because of the energy-driven inflation, will be watching the oil price trajectory closely as it considers whether the conditions for easing monetary policy have finally arrived.
The deal is done. The paperwork gets signed Friday in Switzerland. The mines in the Strait are still there. The oil is waiting to flow.