Oil prices dropped for the second day in a row on 18 June 2026 after the United States and Iran signed a peace agreement, according to Reuters. The price decline happened because traders had been charging extra money for crude oil as a hedge against the risk of war between the two countries.

What they feared was a closure of the Strait of Hormuz, a narrow waterway between Iran and Oman. About one in every five barrels of oil traded globally passes through this strait. The countries that export the most oil from this region include Saudi Arabia, Iraq, Iran, the UAE, and Kuwait. If the strait closed, the world would face a sudden shortage of oil, so traders had pushed prices up in advance.

When the peace deal was announced on 14–15 June, that risk began to fade. By 18 June, when the formal agreement was signed, traders unwound their bets. Think of it like insurance: if you buy flood insurance because a storm is forecast, but the storm misses your town, you no longer need that insurance. You stop paying the extra cost. That is what happened here—traders stopped paying the "war risk" premium on oil.

Before the formal deal, Iran's government had already sent signals of restraint. In March 2026, Iran's Ministry of Foreign Affairs stated that the Strait would remain open for shipping. At the same time, Iran's representative to the United Nations sent a letter about concerns with CENTCOM's military measures in the area. Both countries were signalling they wanted to avoid conflict, even as they prepared their legal arguments.

In another sign that tensions were rising, 35 countries held an emergency meeting chaired by the United Kingdom to discuss security in the Strait, per the Saudi Press Agency. When governments call meetings like this, it usually means they are genuinely worried—not just thinking ahead about small possibilities.

With the peace deal signed, the price pressure has eased. But whether this agreement sticks is an open question. Past peace deals between the US and Iran have not always lasted. The details matter: whether Congress approves any lifting of US sanctions on Iran, how Iran's own government responds to the deal, and what each side actually conceded in negotiations will all shape whether this de-escalation holds or falls apart.

If the peace holds and the US lifts sanctions on Iran, Iran could start exporting more oil again. For years, sanctions have capped Iranian oil exports. A recovery to pre-sanction levels of 3.5–4 million barrels per day would add meaningful supply to global markets. For now, oil traders are focused on short-term price moves. But for longer-term investors—governments and large funds that hold oil assets—the real question is whether Iranian production will actually come back online, and by how much.