Brent crude fell sharply after a US–Iran MoU raised prospects for the Strait of Hormuz reopening. The contract traded down to $82.7 per barrel overnight and was down 35% from April peaks, while remaining above pre-war levels. The move was associated with mild bull steepening in government bonds as central bank rate-hike expectations were pared back on both sides of the Atlantic.
On the charts, support levels were flagged at $82/81, with further floors at $78 and $75, and the 200-day moving average sits around $78. Societe Generale maintained a projection for Brent at $80 per barrel by end-2026, tied to a scenario that assigns a 35% probability to an end-of-June reopening of the Strait of Hormuz and oil flows normalising by January 2027.
Market Reaction To US-Iran Breakthrough
The recent breakthrough in US-Iran discussions is fundamentally reshaping our view of the oil market. We have seen Brent prices fall sharply to around $83 a barrel, reacting to the prospect of normalized oil flows through the Strait of Hormuz. This development has pushed prices down 35% from their April peaks, signaling a clear shift in market sentiment.
We believe this downward pressure will continue as the market digests the potential for increased global supply. Iran could add up to 1 million barrels per day to the market over the next several months, a significant figure that challenges recent OPEC+ efforts to constrain output. Consequently, we are positioning for further price weakness by considering strategies like buying put options.
Technical Levels And Strategy Outlook
Our immediate focus is on key technical levels, which will guide our trading activity. The $82/$81 per barrel area is the first support, but we see the 200-day moving average around $78 as the more critical floor. A decisive break below that level would likely accelerate the move down towards our next target of $75.
This scenario has historical precedent, which strengthens our conviction. Following the initial 2015 Iran nuclear agreement, Brent crude prices trended lower for several months as the market anticipated the return of sanctioned barrels. We expect a similar repricing period to unfold as the details of this new memorandum are finalized and implemented.
With volatility remaining elevated, we see value in using options to express our bearish view. Buying puts with expirations in the next one to two months offers a defined-risk way to capitalize on the expected price decline. This approach allows us to target the move towards $78 and $75 while managing potential upside shocks.
