Oil Prices Fall as Iran Peace Talks Progress, Hormuz Reopens, and U.S. SPR Hits 1983 Low

Global oil prices extended their recent decline on Monday as optimism grew over ongoing U.S.-Iran peace negotiations and the reopening of the vital Strait of Hormuz. The easing of geopolitical tensions in the Middle East significantly reduced concerns over potential supply disruptions, pushing crude oil benchmarks lower.

Brent crude futures for September delivery dropped 2.7% to $77.90 per barrel, while U.S. West Texas Intermediate (WTI) crude futures for August delivery fell 2% to $74.31 per barrel. The decline follows last week's sharp losses, with both benchmarks recording weekly drops of 7% to 9%.

Market sentiment improved after U.S. President Donald Trump signed a memorandum of understanding (MoU) with Iran during the G7 summit in France. The agreement established a 60-day negotiation period and called for an immediate halt to military operations across multiple fronts. A key provision involved reopening the Strait of Hormuz, one of the world's most important oil shipping routes, without charges or restrictions during the negotiation period.

Although concerns resurfaced over the weekend after renewed clashes involving Israel and Iran-backed Hezbollah in Lebanon, diplomatic efforts quickly resumed. U.S. and Iranian officials met in Switzerland alongside mediators from Qatar and Pakistan. Following the talks, U.S. Vice President JD Vance stated that a mechanism had been established to keep the Strait of Hormuz open and maintain regional stability.

Adding to the positive outlook, U.S. Treasury Secretary Scott Bessent announced a temporary 60-day license allowing Iran to produce and export oil as negotiations continue. These developments have largely erased the geopolitical risk premium that had previously supported higher crude prices.

Meanwhile, U.S. energy data revealed that crude oil inventories in the Strategic Petroleum Reserve (SPR) fell to 331.2 million barrels during the week ending June 19, marking the lowest level since June 1983. The 9.1-million-barrel decline represents one of the largest SPR drawdowns on record.

Analysts also noted continued strength in U.S. crude exports and tighter domestic inventories. According to Macquarie energy strategist Walt Chancellor, U.S. crude stockpiles are expected to decline by an additional 1.9 million barrels, following an 8.3 million-barrel draw the previous week. Strong gasoline demand and ongoing export activity remain important factors influencing the oil market outlook.

Investors are now awaiting the U.S. Energy Information Administration's weekly petroleum status report for further confirmation of inventory trends and supply conditions.