Crude oil prices fell to a three-month low Monday after President Donald Trump announced that the United States and Iran had reached a deal, which resumed tanker traffic through the Strait of Hormuz.
Benchmark crude fell nearly 5% to around $83 per barrel, while U.S. West Texas Intermediate crude dropped below $81 per barrel for the first time since March.
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The sharp decline came after Trump said a preliminary agreement had been reached with Iran that would lead to the reopening of the Strait of Hormuz, a critical shipping lane through which one-fifth of the world’s oil supply passes.
Prices started on a downward trend Friday after Trump said a deal with Iran was imminent, with WTI dropping roughly $3 per barrel from Thursday’s price.
Markets have spent months pricing in the risk of prolonged disruptions to oil shipments following the conflict between the U.S. and Iran and the closure of the strait. Oil prices had surged above $120 per barrel during the height of the crisis before retreating as negotiations gained momentum.
Trump announced the agreement in a social media post Sunday, describing it as complete ahead of a formal signing expected later this week. Under the framework, commercial shipping would gradually resume through the strait before its reopening on Friday as border negotiations continue on Iran’s nuclear program and sanctions relief.
“Ships of the World, start your engines,” Trump said in a Truth Social post announcing the Iran deal. “Let the oil flow!”
Vice President JD Vance told CNBC on Monday that the U.S. expectation is that the strait will be “opened in a toll-free way for the long-term” with Friday’s signing.
Energy analysts cautioned that while the market reaction was immediate, a full return to prewar oil prices could take months. Shipping companies must reposition vessels, production facilities will need to ramp back up, and insurers must reestablish coverage for cargo moving through the region.
Still, the decline in crude oil prices could provide relief at the pump. The national average price of a gallon of regular gasoline has remained high in recent months as the conflict disrupted global energy markets.
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AAA reported the national average price per gallon of gas on Monday was $4.065, a small decline from the national average a month ago, when it was $4.528. The highest recorded average price per gallon during the war was over $5, according to AAA.
Lower crude prices generally filter down to consumers within several weeks, though it is unlikely prices will fall to prewar levels anytime soon, as tankers need time to travel, crude oil needs to be refined, and local distributors need to transport products.
