Brent crude slides to three-month lows as the US-Iran deal reopens the Strait of Hormuz. These are the key levels to watch

Brent crude has slid to a three-month low in the low-$80s after the US and Iran reached a peace agreement aimed at ending the war and reopening the Strait of Hormuz. The interim accord is expected to be signed in Switzerland on Friday, and reportedly covers the reopening of the strait, the lifting of the US naval blockade on Iranian ports, the dismantling of Iran’s nuclear programme, and economic incentives if Tehran complies.

Key takeaways:

• The US and Iran have announced a deal to end the war and reopen the Strait of Hormuz, with a signing expected in Switzerland on Friday.
• Brent has dropped to a three-month low in the low-$80s, breaking below the support zone that held back in mid-April.
• The text of the agreement has not yet been released, and previous announcements have repeatedly fallen through, so some caution could persist until the deal is signed.
• Price action appears to suggest the market may be assigning a higher probability to this deal holding than to the earlier attempts.

The move marks a sharp reversal of the war premium that has driven oil for more than three months. The conflict began on 28 February, when US and Israeli strikes on Iran prompted Tehran to effectively close the Strait of Hormuz, a chokepoint that carries roughly a fifth of global oil shipments. Brent, which sat near $72 before the war, spiked above $113 by late March and averaged around $107 in May, according to the EIA. Even after this latest drop, oil remains well above its pre-war level, a sign that a portion of the premium is still embedded in the price.

Daily timeframe

On the daily chart, Brent has broken below the major support zone around 84 to 85. That area matters because it marks the low from mid-April, where oil bounced after Iran’s foreign minister declared the Strait of Hormuz open on 17 April, a declaration that was reversed roughly a day later and sent prices back higher.

Price is now trading below that bounce low. This could suggest the market is assigning a higher probability to this latest deal holding, as opposed to the earlier announcements that produced repeated whipsaws within the range.

The next major support sits around 78 to 79. A break below that area could open the door towards 71 to 72. A move into that lower zone could be a stronger signal that the market is pricing in a genuine end to the war, a reopening of the Strait of Hormuz, and a longer-term resolution to the conflict.

One-hour timeframe

On the one-hour chart, a short-term range has formed following the gap lower that came with the weekend deal announcement. At the time of writing on Tuesday morning, Brent is breaking below the 82 level at the base of that range.

That break could signal the market is pricing in a continuation of the move lower as the deal progresses. If downside momentum builds from here, the focus shifts to the higher-timeframe support area beginning around 79.

For more on how the conflict has driven oil in recent weeks, see our previous coverage.

What to watch:

• Friday’s scheduled signing of the agreement in Switzerland as the key confirmation point.
• A break below 78 to 79, which could open the path towards 71 to 72.
• Any sign the deal stalls or unravels, which has happened before and could quickly revive the war premium.

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