Oil prices fell sharply as traders priced in the prospect of restored crude flows through the Strait of Hormuz following a preliminary peace agreement between the United States and Iran. U.S. crude closed down 4.8% to $80.75 a barrel, its lowest level since early March, while international Brent crude fell 4.7% to $83.17. The declines came even as broader equity markets surged, with the energy sector standing out as the lone major laggard.

The Energy Select Sector SPDR fund fell 3.6% on the day, the worst performance among the major sector SPDRs, as lower crude prices weighed directly on the earnings outlook for exploration and production companies. The move stood in sharp contrast to gains across technology, communication services, and consumer discretionary sectors, underscoring how directly energy equities are tied to the trajectory of the conflict's resolution.

The agreement, announced this week, includes plans to reopen the Strait of Hormuz, a narrow waterway between Iran and Oman through which roughly one-fifth of the world's seaborne crude oil supply normally passes. President Trump said he had also authorized the lifting of a U.S. naval blockade on Iranian ports as part of the broader deal, and indicated the strait could reopen within days of the agreement being formally signed.

Despite the decline, analysts caution that a return to pre-war oil market conditions is unlikely to happen quickly. Shipowners, insurers, and vessel crews will need to be convinced that transiting the strait is safe before full-scale maritime traffic resumes, and risk consultancy estimates suggest tanker traffic could take several weeks to reach even half of pre-conflict levels. Brent crude futures for delivery through February 2027 remained anchored near $80 a barrel even after the announcement, suggesting the market views a full and immediate return to pre-war flows with some skepticism.

Oil remains well above levels seen before the conflict began, even after the latest pullback. Crude prices are still elevated relative to year-ago levels despite having retreated significantly from the highs reached during the most acute phase of the fighting. Some analysts noted that crude is now roughly two-thirds of the way back toward where it started the year, but cautioned that getting supply chains fully back to pre-war levels could take considerably longer than headlines suggest.

The pullback in energy prices carries broader implications beyond the sector itself. Lower crude costs are expected to ease inflationary pressure that has been a central concern for the Federal Reserve, while also reducing input costs for airlines, shippers, and other energy-intensive industries that have struggled with elevated fuel expenses throughout the conflict.

Retail gasoline and diesel prices, which had climbed sharply during the war, are expected to ease gradually in the coming weeks, though analysts note pump prices typically lag wholesale crude moves and may not fall as quickly as futures markets have.