Brent crude initially slid after a US‑Iran memorandum of understanding, before recovering to end 0.38% higher at $79.85 a barrel, after trading as low as $76.45 intraday, Deutsche Bank said. The move followed a shift in market positioning away from war‑related economic concerns as officials pointed to resumed transit through the Strait of Hormuz.
US and Iranian officials indicated that oil flows had restarted, with the US vice president saying 12.5mn barrels moved through the strait the previous night and adding that nearly a dozen ships had passed the US blockade. Under the arrangement, Iran is to provide safe passage for commercial vessels without charge for 60 days, while it will hold talks with Oman on future administration and maritime services in the Strait of Hormuz; governance and potential future fees remain unresolved.
Short-Term Implications And Trading Strategies
Given the new understanding between the US and Iran, we see the immediate war premium that has kept oil prices elevated beginning to fade. The confirmation of 12.5 million barrels already passing through the Strait of Hormuz suggests a swift return to normal flows. With about 20% of the world’s daily oil consumption transiting this chokepoint, this guaranteed passage significantly reduces short-term supply disruption risk.
For the next few weeks, we anticipate this will put downward pressure on Brent crude prices, creating a softer market. The 60-day window of free passage provides a clear period of stability, which should lower implied volatility on front-month options. We believe selling out-of-the-money call options or buying puts for July and early August expiry is a prudent strategy to position for a drift back towards the mid-$70s.
Medium-Term Market Dynamics And Risk Considerations
However, this price weakness is likely temporary, as the underlying market remains tight. Recent EIA data shows US crude inventories fell by 2.5 million barrels last week, while OPEC+ has maintained its production discipline through the second quarter. The initial price drop to $76.45 and its sharp recovery to nearly $80 shows that fundamental demand is still strong enough to absorb this returning supply.
Therefore, our main focus is on the period approaching the 60-day deadline in mid-August. We saw a similar pattern of rising volatility around the negotiations for the 2015 JCPOA agreement. We are planning to purchase longer-dated straddles or strangles to position for a significant price move as uncertainty over future passage fees and regional stability returns.
