The US-Iran agreement went public today. And oil prices got hit again. But here is the thing – the market is pricing certainty where none actually exists.

The US-Iran agreement went public today. And oil prices got hit again. But here is the thing – the market is pricing certainty where none actually exists.

Where prices stand right now

WTI is trading around $74.10 for the July contract. Brent fell below $77. Murban is at roughly $71.81. Natural gas is actually up 3% to $3.240. Gasoline prices have eased – the national average dropped below $4 a gallon for the first time since March.

The agreement is signed but the work is not done

The MoU was signed Wednesday by Trump and Iranian President Pezeshkian. It kicks off a 60‑day negotiation period. Iran can resume oil sales immediately, provided it does not block the Strait. The US will lift sanctions on Iranian oil and lift restrictions on Iranian ports. At least 10 commercial ships have already transited the strait as of Thursday morning.

But here is what the market is ignoring. The strait reopening is not the same as full supply recovery. Goldman Sachs expects Persian Gulf exports to return to pre‑conflict levels by the end of July, but shipowners remain cautious and risk aversion could slow the recovery. The IEA explicitly warned that "operational and political constraints, including prolonged demining and unresolved transit arrangements, leave downside risks to the outlook".

The fundamentals argue against lower prices

US crude inventories fell for the 10th straight week. Commercial stocks dropped by 8.3 million barrels to 418.2 million – well above the 4.6 million draw that analysts expected. Total inventories including the SPR plunged to 758.5 million barrels, the lowest since March 1985. Cushing storage hit 20.03 million barrels, its lowest since 2014 and near operational lows. Gasoline stocks are 6% below the five‑year average.

OECD inventories fell to their lowest level since 1990. Global oil stocks declined by 143 million barrels in May alone – a drawdown rate of 4.6 million barrels per day. Since the conflict began, inventories have fallen by an average of 3.8 million bpd.

Supply is not coming back overnight

OPEC+ real production collapsed from 42.77 million bpd in February to 33.19 million bpd in April due to export disruptions. Seven OPEC+ nations agreed to increase output by 188,000 bpd in July, but that is a drop in the bucket compared to the 13.6 million bpd shortfall from pre‑war levels. The IEA forecasts global supply will actually decline by 3.9 million bpd in 2026 before any meaningful recovery in 2027.

Demand is weaker but that is already priced in

The IEA cut its 2026 demand forecast by 700,000 bpd, now expecting a 1.1 million bpd year‑over‑year decline. Oil deliveries plunged by 5 million bpd in Q2 as high prices crushed consumption. Refinery runs are forecast to contract by 2 million bpd this year.

The real question is what happens after 60 days

The MoU is temporary. Iran's nuclear program is unresolved. The 60‑day window is when negotiators tackle the "most contentious and unresolved issues". If talks stall, sanctions could snap back. If Iran blocks the strait again, all bets are off. The IEA noted that "a full recovery is expected to take time as shipping lanes must be cleared and regional supply chains normalized".

The market is behaving like uncertainty has disappeared. But inventories are historically tight. Supply growth is limited. And rebuilding confidence after a war takes months not days. The recent selloff is driven more by optimism than by a dramatic improvement in fundamentals. Markets price the headlines first. Reality tends to arrive later.

That gap between the headline and the reality – that is where the real risk sits.

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This content is for informational purposes only and does not constitute financial advice.