Oil Falls 3% Toward $85 as U.S.-Iran Peace Deal Raises Hopes of Strait of Hormuz Reopening (USO, XLE)

Oil prices tumbled on June 12 as optimism over a U.S.-Iran peace deal eased concerns about disruptions to global energy supply. West Texas Intermediate (WTI) crude for July delivery fell roughly 2.8% to $85.26 per barrel, while international benchmark Brent for August lost about 2.5% to $88.13. WTI dipped below $86 intraday, marking its weakest level in nearly two months. The selloff followed reports from Iran's Mehr News Agency of a 14-point draft agreement aimed at ending the conflict. Key provisions reportedly include a commitment from Tehran to reopen the Strait of Hormuz within 30 days, the lifting of U.S. oil sanctions, the withdrawal of American forces from Iran, and Iranian pledges to forgo nuclear weapons development. President Trump indicated a deal could be finalized as early as this weekend, with reconstruction commitments potentially reaching $300 billion. The Strait of Hormuz is the world's most critical oil chokepoint, with roughly a fifth of global crude shipments passing through it. A durable reopening would significantly reduce the geopolitical risk premium that has driven price volatility throughout 2026. Notably, oil has now retreated around 20% from its 2026 peak as investors grow more confident in a lasting ceasefire. BMO Capital Markets noted that prices have stayed surprisingly contained despite recent exchanges of U.S.-Iran strikes, citing diplomatic momentum, alternative shipping routes that bypass Hormuz, and sharply lower Chinese crude imports as factors offsetting supply fears. Still, traders remain cautious. Even a signed agreement would face meaningful obstacles before crude flows fully normalize, including clearing mines from the waterway, restarting idled production fields, and repairing energy infrastructure damaged by drone and missile attacks. Tehran has also pushed back on portions of the framework, leaving room for negotiations to falter. For energy markets, the immediate read is bearish on crude as the supply-risk premium deflates. Lower oil prices weigh on producers and energy-sector funds such as the Energy Select Sector SPDR Fund (XLE), while pressuring crude-tracking vehicles like the United States Oil Fund (USO). Conversely, easing energy costs could provide relief at the pump and a modest tailwind for consumer-facing and transportation names. Investors should watch for confirmation of the deal this weekend, as any collapse in talks could quickly reverse Friday's losses. Sources: [CNBC: Oil prices fall on proposed U.S.-Iran peace deal](https://www.cnbc.com/2026/06/12/oil-prices-wti-brent-on-hopes-of-us-iran-deal-despite-tehran-pushback.html), [CNBC: Oil drops 20% from 2026 peak](https://www.cnbc.com/2026/05/29/oil-prices-iran-ceasefire-us-trump-strait-hormuz-energy-costs.html), [Trading Economics: Crude Oil](https://tradingeconomics.com/commodity/crude-oil)