Oil prices fell for a second consecutive session on 18 June 2026 after the United States and Iran signed a peace agreement, according to Reuters, removing the geopolitical risk premium that had been embedded in crude since tensions over the Strait of Hormuz escalated earlier this month. The selloff extends a move that began on 14–15 June, when the two countries announced a halt to hostilities and committed to keeping the Strait open to maritime traffic.

The Strait of Hormuz is the world's most consequential oil chokepoint, carrying roughly a fifth of global petroleum supply — including the bulk of crude exports from Saudi Arabia, Iraq, the UAE, Kuwait, and Iran itself. Any credible closure threat compresses the entire forward curve as traders price in supply disruption risk. When that threat lifts, the unwind is mechanical.

Iran's Ministry of Foreign Affairs had already moved to pre-empt market anxiety, issuing a statement in March 2026 affirming that the Strait remained open and maritime traffic uninterrupted. That statement landed against a backdrop of sustained diplomatic pressure: Iran's Ambassador to the United Nations had separately written to the Secretary-General contesting what Tehran characterised as CENTCOM's unlawful measures regarding the Strait — a signal that even as both sides signalled restraint publicly, the legal and military posturing was running in parallel.

Multilateral engagement around Hormuz security had also intensified at the ministerial level. A 35-country meeting chaired by the United Kingdom convened to address maritime security in the Strait, per the Saudi Press Agency, reflecting how broadly exposed the global energy supply chain is to any interruption there. That kind of coalition-building is typically a lagging indicator of perceived threat — governments don't convene emergency ministerials over hypotheticals.

The price action across both sessions is consistent with a classic risk-premium compression trade. When a geopolitical tail risk — closure of Hormuz, interdiction of tanker traffic — is priced into the front month but then visibly de-escalates, longs unwind quickly. There is no inventory shock to absorb, no physical supply disruption to correct; the move is purely a repricing of probability-weighted scenarios. The speed of the reversal reflects how liquid crude futures markets are, and how efficiently they incorporate headline diplomatic shifts.

The harder question now is where the fundamental floor sits. OPEC+ production policy, demand trajectories in China and India, and the pace of non-OPEC supply growth from the US, Guyana, and Brazil all feed the base case independently of geopolitics. With the Hormuz premium largely drained, the market reverts to debating those structural variables. Iran's own export capacity — constrained for years by sanctions — becomes relevant again if the peace deal holds and some sanctions relief follows; incremental Iranian barrels would add to an already-adequate supply picture.

None of this resolves cleanly. Peace agreements between the US and Iran have been fragile historically, and the specific terms of the 18 June deal — what the US conceded, whether Congress supports any accompanying sanctions relief, how Iranian domestic politics receives it — will determine whether this de-escalation is durable or a temporary equilibrium. Futures markets can re-price risk back in as quickly as they priced it out.

For energy traders, the near-term signal is straightforward: the geopolitical overlay is thinner than it was a week ago. For sovereign wealth funds and national oil companies with long-dated exposure, the more consequential variable is whether a sustained diplomatic settlement allows Iranian production to recover toward its pre-sanctions potential of roughly 3.5–4 million barrels per day — a volume that would matter to the medium-term supply balance in a way that two days of futures positioning does not.