Crude futures fell by about 4pc in early trading today on announcements that a deal between the US and Iran has been reached, raising expectations of the likelihood of an imminent reopening of the strait of Hormuz.
The front-month August Ice Brent contract dropped to $83.24/bl as of 11:00 Singapore time (03:00 GMT), down by 5pc from the close on 12 June.
The July Nymex WTI contract dropped more sharply to $80.17/bl, down by 5.5pc from 12 June.
US president Donald Trump on Sunday said that an agreement with Iran was "now complete".
"I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade," Trump wrote in a post on Truth social at 5:29pm ET (21:29 GMT). "Ships of the World, start your engines."
Iran's deputy foreign minister Kazem Gharibabadi said the agreement will kick off a 60-day period of further negotiations, which would include the removal of all sanctions against Iran, the handling of Iran's nuclear programme, economic reconstruction and mechanisms to implement the agreement, according to Iran's semi-official Tasnim news agency.
Global leaders have begun issuing responses to the news of the deal.
France, the UK, Germany and Italy released a joint statement saying that they are "prepared to lift relevant sanctions [on Iran] in response to clear, verifiable steps by Iran on its nuclear programme", and that "Iran must never acquire a nuclear weapon". The countries will also provide their support in efforts to reopen the strait of Hormuz "including through a strictly defensive and independent mission to reassure commercial shipping and conduct mine clearance operations", they said.
The official signing of the deal will take place on 19 June in Switzerland, said Pakistani prime minister Shehbaz Sharif, who has been facilitating negotiations between the US and Iran. Mediators will hold meetings this week laying the groundwork for technical talks and the official signing, he said.
"Both sides have declared the immediate and permanent termination of military operations on all fronts, including in Lebanon," Sharif wrote in a post on social media.
It remains unclear if tankers and other commercial vessels that have been stuck in the Mideast Gulf for months would be able to immediately start crossing the strait of Hormuz, portions of which have been mined. Iranian officials have yet to confirm whether ships can cross the strait without adhering to requirements they have attempted to impose on maritime traffic.
