Oil Prices Drop Below $100 On Iran Deal Optimism

Oil prices dropped below $100 in early Asian trade on Monday following reports over the weekend that a deal to reopen the Strait of Hormuz was in its final stages.

At the time of writing, both oil benchmarks had dropped by more than 5%, with Brent breaking back below $100 to trade at $98.81, while WTI fell to $92.06.

Optimism around a deal was tempered somewhat on Sunday when President Donald Trump posted on social media that he had informed his representatives “not to rush into a deal.”

A senior U.S. administration official later added that, while progress had been made, the deal would not be signed on Sunday.

The deal aims to reopen the Strait of Hormuz, end the war, and see Iran give up its enriched uranium.

The first stage of the agreement would involve a 60-day extension of the ceasefire, during which traffic would resume through the Strait while nuclear negotiations continue.

Iranian news agency Tasnim reported that the number of vessels transiting the Strait could return to pre-war levels within 30 days if an agreement is reached.

The deal would also include an end to the war between Israel and Hezbollah, although Israeli Prime Minister Benjamin Netanyahu emphasized that “any final agreement with Iran must eliminate the nuclear danger.”

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Spokesperson for the Iranian Ministry of Foreign Affairs Esmail Baghaei said that while the memorandum of understanding was in its final stages, details regarding the nuclear issue were not being discussed at this stage.

While an agreement would provide much-needed relief to oil markets, it remains unclear how quickly oil flows could return to pre-war levels and how long it would take to restore damaged oil and gas infrastructure.

Even then, without a final agreement that clearly guarantees uninterrupted traffic through the Strait in the future, the geopolitical risk of another major energy crisis would remain.