Brent is trading back near $80 and WTI around $77 after giving up almost all the risk premium built over nearly four months since fighting began on 28 February. Crude had risen more than 45%, with dated Brent cargoes above $120 at the peak, but prices have retraced as the market treats a US-Iran memorandum of understanding as an all-clear. Brent is down roughly 8% on the week and sits in the low $80s, while US equities are at a record high. The Strait of Hormuz, which handles roughly a fifth of the world’s crude, is described as reopened, yet tanker trackers still place the central channel closed with an estimated 80 mines to clear; traffic is using northern and southern side routes, with US Central Command (CENTCOM) adjusting port restrictions and advisories.
The MoU is a 14-point bilateral document signed at Versailles and in Tehran, even though the conflict’s flashpoints include Lebanon, where Israel is fighting Hezbollah. Technical talks due in Switzerland did not begin after Iran withheld its delegation, and the MoU’s 60-day timetable sits against a backdrop in which the Lebanon truce has been struck, broken and renewed at least five times since April. Earlier in April crude fell about 16% in a single session on a ceasefire announcement, only for renewed strikes to follow; by early May Brent rose 6% in a day above $110, WTI moved past $100, and the Dow dropped more than 500 points. Beirut authorities reported 47 dead after what was described as Israel’s second-deadliest day in Lebanon, while a separate April strike wave was reported to have killed more than 350 people.
Volatility, Market Complacency, and Supply Realities
We see the market has sold off the war premium, with Brent crude futures trading around $80. The CBOE Crude Oil Volatility Index (OVX) has collapsed to a five-month low near 28, meaning the price of options is cheap. This suggests traders are too comfortable with the new US-Iran deal.
The facts on the water do not match this calm. Maritime intelligence data from this morning shows tanker transits through the Strait of Hormuz are still running 30% below their pre-conflict average. This is not a normalized supply route; it is a constrained channel being managed by the IRGC, who can turn off the tap at any moment.
This complacency feels just like early April, when a similar ceasefire announcement caused a 16% price collapse before reversing violently. The latest EIA report showed a surprise crude inventory draw of 4.2 million barrels, meaning the underlying market is already tight. Any supply disruption now would have an amplified effect on prices.
Persistent Conflict Risks and Strategy
The core issue remains that this deal was signed by two parties in a three-party war. Israeli officials were quoted today, June 20th, stating their military posture in Lebanon has not changed, directly contradicting the spirit of the agreement. This is a clear signal that the risk of conflict reigniting remains extremely high.
Given this, we believe selling the last of the war risk at $80 is a mistake. Buying cheap, out-of-the-money call options for August expiry looks like an attractive way to position for a snap-back in prices. History shows geopolitical flare-ups, like the 2019 drone strikes on Saudi facilities, can send prices soaring over 15% in a single day.
The triggers for a move back toward $90 or even $100 Brent are obvious and numerous. Any clash in the Strait, a breakdown of the fragile Lebanon truce, or Iran stalling on the nuclear talks will force the market to re-price this risk immediately. We should be using this period of low volatility to build long exposure, not join the crowd in assuming peace is guaranteed.
