Key facts
- Oil prices settled at a three-month low following President Donald Trump's announcement of a U.S.-Iran memorandum of understanding.
- The agreement aims to end the Iran war and reopen the Strait of Hormuz.
- Brent crude futures fell 4.76% to $83.17 a barrel, and WTI crude futures fell 4.87% to $80.75.
- Citigroup lowered its Brent crude forecasts for 2026 and 2027, anticipating normalized trade flows through the Strait of Hormuz.
- Citigroup also raised its short-term gold and silver price forecasts.
- U.S. Strategic Petroleum Reserve crude oil stocks are at their lowest level since 1983.
Oil prices experienced a significant decline, settling at a three-month low after U.S. President Donald Trump announced that a memorandum of understanding (MoU) had been signed with Iran, aiming to end the Iran war and reopen the Strait of Hormuz. Brent crude futures fell by 4.76% to $83.17 a barrel, and U.S. West Texas Intermediate (WTI) crude futures dropped 4.87% to $80.75, erasing war-risk premiums accumulated in recent months.
The MoU, reportedly signed by President Trump, Vice President JD Vance, and Iranian parliament Speaker Mohammad Bagher Qalibaf, is expected to lead to the reopening of the Strait of Hormuz within 30 days under Iranian arrangements. This development prompted Citigroup to lower its average Brent crude forecasts for the third and fourth quarters of 2026 to $75 and $70 per barrel, respectively, and its 2027 forecast to $65 from $80, citing expectations of normalized trade flows.
Citigroup's base case, assigned a 60% probability, assumes sustained Strait of Hormuz flows by mid-to-late July. Analysts suggest that if this agreement is fully priced in, crude oil prices could be $10–$15 per barrel lower. The bank also raised its short-term gold price forecast to $4,500 per ounce and silver to $70 per ounce, anticipating improved broader risk sentiment, while maintaining a bullish 6-12 month gold view at $5,000 per ounce.
Market participants are cautiously observing how quickly Middle Eastern producers can resume oil production and exports, and whether more ships will enter the region. The International Energy Agency reported that over 14 million barrels per day of oil output is shut due to the conflict. U.S. Strategic Petroleum Reserve crude oil stocks have fallen to their lowest level since 1983, drawing down by 8.9 million barrels as part of a larger U.S. release plan.