Oil prices are experiencing volatility as the market anticipates the formal signing of an interim peace deal between the United States and Iran. Brent crude, which had fallen to $78.35 per barrel on June 17, has retraced some of those losses as traders weigh the implications of sanctions waivers and the reopening of the Strait of Hormuz. The price movement follows a significant drop from over $110 per barrel at the peak of the Strait of Hormuz closure, reflecting a rapid repricing across energy markets in expectation of an increase in Iranian oil flows.
The interim agreement, a 14-point framework, is scheduled for formal signing on June 20. The deal allows Iran to immediately begin selling oil and fuel, with waivers on sanctions covering banking, transportation, and insurance taking effect. According to TankerTrackers, several Iranian tankers have already exited the US blockade zone, with two NITC tankers (Diona and Hero 2) carrying 3.8 million barrels of oil, and another (Sonia I) carrying 1 million barrels, sailing past the blockade line.
Energy insiders, however, remain skeptical about how quickly the Strait of Hormuz can fully reopen and how swiftly Iranian oil can re-enter global markets. While a Reuters estimate, unverified, suggests flows could return to 70% of pre-war levels within three months and 90% within six months, this stepwise restoration highlights that the peace dividend will arrive in stages. The immediate waivers on oil sales are seen as a significant concession by the US, potentially reducing its leverage in ongoing negotiations.
The deal also outlines a 60-day negotiation period following the signing of a memorandum of understanding, aimed at reaching a comprehensive agreement on Iran's nuclear program and lifting international sanctions. Despite the immediate relief in oil prices, concerns persist regarding the reversibility of the diplomatic framework if these further negotiations fail. Meanwhile, the Federal Reserve, under its new Chair Kevin Warsh, held benchmark rates steady at 3.5%-3.75% at its June 2026 meeting, influenced by the oil shock that reignited inflation, indicating that lower borrowing costs may not immediately follow the Middle East ceasefire.
