Brent is back near $80 and West Texas Intermediate near $77, meaning the oil market has given back almost the entire premium it created during the nearly four-month open war with Iran. The tape is treating this week’s US-Iran memorandum as a finished peace: The blockade is lifted, the Strait of Hormuz reopens, approval to sell Iranian barrels is granted, stocks are at record highs while the President wins over falling pump prices.
The problem is that this is exactly what the market traded in April, the price went flat in a single session, and it was over in a matter of hours, while the people who could actually break the armistice were never asked to sign it. Nothing about the way this deal was constructed suggests that a second attempt would end differently.
All-Clear price set first
Since the fighting began on February 28, Brent and WTI have risen more than 45%, with dated Brent cargoes peaking at printing above $120 as Hormuz traffic was seized and Gulf loading collapsed. That premium has now ended. Brent has fallen nearly 8% in the week alone to hit a low of $80, and crude has erased almost all of its wartime gains to where it is trading near the day the first missiles took off.
Risky assets followed suit, with US equities at record highs and the President ranting about the drop in crude on Truth Social and on a recorded tape calling his critics jealous or stupid. In short, the market is right: a deal exists, it’s been signed, and the ships are sailing. Read in contrast to what the deal actually entails, reducing risk quickly.
Open on paper, mining in water
Let’s start with the thing that concerns the entire move pricing, the reopened Strait of Hormuz, the artery for about a fifth of the world’s crude. It is open, but only at the edges. Tanker-industry trackers still closed the main central channel, with an estimated 80 mines remaining to be cleared; With traffic diverting the northern route inside Iranian waters and the southern route touching the coast of Oman, US Central Command (CENTCOM) has lifted port restrictions and advised ships to sail towards the Omani side to avoid mines.
Even the flow that is increasing is being metered by Iran’s Islamic Revolutionary Guard Corps (IRGC), which is openly limiting the number of ships to manage congestion. And Tehran is already fighting over the terms: While Washington announced a toll-free opening, Iran says no such clause exists and that it will run the waterway on its own, including arrangements, inspections, services and security. So the supply relief that the market has demanded is being delivered by Iran, at Iran’s speed, in Iran’s words, reversible. This is not a generalized strait. This is a tap on which Tehran has the upper hand.
Two-party agreement for a three-party war
Here’s the part the price action is ignoring. The Memorandum of Understanding (MOU) is a 14-point bilateral document, signed by President Trump in Versailles and Iranian President Massoud Pezeshkian in Tehran. The war that needs to end is not a bilateral one. Its most dangerous front runs through Lebanon, where Israel is fighting Hezbollah, and Israel has never signed anything. The text calls for an end to the war on every front, including in Lebanon; Israel’s Defense Minister has said in clear words that the Israeli army will continue to occupy the land it has captured in Lebanon, Gaza and Syria indefinitely.
This distinction is not academic, as Iran has already found the lever inside. Technical talks scheduled to begin today in Switzerland failed before they even began, with Iran blocking its delegation over Israel’s Lebanon campaign and demanding Israel withdraw first. So the 60-day clock that’s supposed to push Iran toward a nuclear deal is a clock that Iran can stop whenever Israel pulls a trigger that Iran doesn’t control. Three unbounded actors, Israel, Hezbollah and Iran’s own hardliners, could each break it, and the president’s assurances that he could keep Israel in line came just hours before Israel launched its second-deadliest day of the war in Lebanon, with the government in Beirut counting 47 dead.
April has already run this experiment
The reason to distrust round-trips is because the market has lived it. In early April, Washington announced a two-week ceasefire and crude oil fell nearly 16% in a single session, with Brent falling to the low $90s on the same logic driving today’s tape. Within hours Israel attacked Beirut in what it described as its biggest attack of the war, killing more than 350 people and breaking the ceasefire.
It all broke in early May: Brent jumped 6% in a day to above $110, WTI cleared $100, the Dow fell more than 500 points, and volatility bids came back. Then the market faded the war premium and reversed course. Now it is turning it around again from a lower base in a deal whose first procedural step has already failed. The count of successive ceasefires is telling. The Lebanon ceasefire alone has been struck, broken and renewed at least five times since April, and today’s version came just after one of the bloodiest days of the conflict and still has no confirmation from the Israeli military or Hezbollah. A ceasefire that has to be declared again and again is not peace. This is a stopover with better public relations.
where the lean sits
The tape has kept the price of a clean 60-day glide up to a permanent deal. The problem is that the premium is so cheap that three spoilers on one window can explode. $80 Brent is the level the market is defending, and higher triggers write themselves: an incident in Hormuz, a hard break in the Lebanon ceasefire, or Iran walking off the nuclear track as the clock runs out. Each one points the tape towards the $90s, and the actual re-closing of the Strait reopens the $100-plus regime that the market has spent several weeks breaking open.
The other side is also honest: If the lateral routes remain open, the mines come out, and next week’s Washington meetings hold Lebanon together, the premium continues to flow toward the low $70 base that prevailed before the war. But the risk-reward leans toward keeping some of the war’s tradeoffs rather than selling near $80. The deal has been signed. Whether it will continue or not is being decided by those who never signed it.
Brent spot, daily chart
