Brent crude falls below $77 as US-Iran talks ease supply fears

Brent crude tumbled below $77 a barrel on Monday after the US and Iran reached a framework agreement that includes a 60-day authorization for Iranian oil sales.

Brent crude fell below $77 a barrel on Monday, the lowest in more than three months, after the US and Iran reached a framework agreement that includes a temporary authorization for Iranian oil exports.

"Iran has committed to free and open transit in the Strait of Hormuz and to permit IAEA inspectors into their country," Treasury Secretary Scott Bessent said in a post on X, announcing a 60-day general license for Iranian oil sales. Vice President J.D. Vance called the development "great progress" and said a process is now in place to prevent regional escalation, adding that Iran's agreement to IAEA inspections was "a major milestone" and "the first step in ensuring that Iran is either permanently denuclearized or that it permanently ends its nuclear weapons program."

Brent futures expiring in August fell 3.3% to $76.99 a barrel, while US West Texas Intermediate crude dropped 2.93% to $73.63 — the lowest levels since early March. The declines extended a month-long rout that has erased nearly 24% from crude prices since late May, when Brent traded above $124 following the de facto closure of the Strait of Hormuz. The Energy Select Sector SPDR Fund, which tracks S&P 500 energy names, has shed 12% over the same period after climbing to $61.29 on May 19, though it remains up 21% year to date.

The agreement removes the single biggest geopolitical risk premium embedded in crude prices — the threat of a sustained supply disruption through the Strait of Hormuz, through which about 20% of global oil passes. With Iranian exports resuming and other Middle East producers including Iraq, Kuwait and the UAE already boosting output, the question for traders is whether Brent can hold above $80, a threshold that underpins cash flow for major producers including Chevron and ConocoPhillips.

Iran's Return to Export Markets

Iranian Foreign Minister Abbas Araqchi said his government had secured waivers allowing the export of oil and petrochemicals, the release of some frozen assets, and a reconstruction and development plan. The National Iranian Oil Company reported that more than 25 million barrels of Iranian oil had crossed the former US naval blockade since Monday. Iraq's deputy oil minister for upstream affairs said Sunday that the country intends to gradually boost crude production to between 4.2 million and 4.3 million barrels per day, adding to the supply overhang. Elsewhere in the region, QatarEnergy confirmed an explosion and fire at the Barzan gas supply facility in Ras Laffan Industrial City on Sunday evening that left 54 people injured and 18 missing, though the incident did not affect crude flows.

The $80 Threshold and What Comes Next

The EIA's May Short-Term Energy Outlook projected Brent would average about $106 in May and June before falling to $89 in the fourth quarter of 2026 and $79 in 2027 as Middle East production returns and global inventories rebuild. Brent has already moved faster than that schedule, printing $93.76 the week of June 12 before this week's slide below $77. Chevron's first-quarter results were built on an average Brent price of $81; ConocoPhillips realized $50.36 per barrel of oil equivalent at that price. A sustained drop into the $70s would compress upstream cash flow across Exxon Mobil, Chevron and ConocoPhillips simultaneously — three stocks that together drive more than 41% of the XLE.

The Dow Jones Industrial Average rose more than 320 points in Monday's opening trade on the news, while the S&P 500 gained 0.3% and the Nasdaq Composite edged up 0.08%. The last time a comparable supply normalization occurred — the 2014-2016 OPEC cycle — the XLE fell from roughly $100 to under $50 over 18 months, a cautionary precedent for energy investors watching the current unwind. The EIA's weekly petroleum status report, due Wednesday, will provide the first hard data on how quickly Iranian barrels are returning to global markets.

This article is for informational purposes only and does not constitute investment advice.