Brent Crude Falls to $79 as Iran and US Sign Islamabad MOU, Hormuz Oil Sanctions Lifted

Brent crude futures were trading at $79.04 per barrel on Thursday, June 19, per ICE Brent data reported by TradingEconomics, tracking toward a roughly 10% weekly decline. WTI July futures climbed above $77 per barrel on CME, trimming some of the session's earlier losses. Both benchmarks are pricing in full normalization of the Strait of Hormuz following the Islamabad Memorandum of Understanding, set to be formally signed Thursday at Switzerland's Bürgenstock resort near Lucerne.

What the Islamabad MOU Contains

The agreement, facilitated by Pakistan's Prime Minister Shehbaz Sharif, extends the US-Iran ceasefire for 60 days and establishes a framework for permanent settlement negotiations. Iran reaffirmed its commitment to not develop nuclear weapons, though its missile programme remains outside the scope of talks. The MOU immediately lifts the US naval blockade on Iranian ports and provides a path for Hormuz to reopen for commercial shipping, with Iran and Oman tasked with finalizing a new transit governance regime that includes service fees.

France's President Macron confirmed the deal "allows reopening of the Strait of Hormuz" and will "decrease energy prices." Iran's foreign ministry said it would "monitor US compliance without any leniency." Pakistan confirmed the MOU went into effect after both President Trump and Iran's President Masoud Pezeshkian electronically signed it earlier in the week, with the Bürgenstock ceremony serving as the formal closing.

The Supply Numbers Behind the Price Drop

The International Energy Agency's June 2026 Oil Market Report estimated that Strait of Hormuz shipping flows recovered from a May low of 9.6 million barrels per day to approximately 12 million barrels per day by early June. The pre-conflict baseline ran at roughly 17 million barrels per day, leaving about 5 million barrels per day of transit capacity still suppressed. The IEA projects global supply will fall 3.9 million barrels per day on average across 2026, to 102.4 million barrels per day, even as the ceasefire recovery accelerates.

Iran's own export trajectory tells the same story of partial, uneven recovery. Pre-conflict production ran at roughly 3.2 million barrels per day, with exports near 2 million barrels per day. By May 2026, Chinese refiners were importing just over 1 million barrels per day of Iranian crude, down 38% from March levels, according to Al Jazeera reporting on Tehran's storage constraints.

The EIA's June Short-Term Energy Outlook quantified the Gulf-wide shutdown at 11.3 million barrels per day at the May peak. That figure reflected curtailments across Saudi Arabia, the UAE, Kuwait, and Iraq, all of which depend on Hormuz for export access, not only Iran. As the strait normalizes, that capacity returns unevenly: Iranian oil requires formal sanctions relief, while other Gulf producers can ramp more quickly once shipping lanes reopen.

Prices Are Already Where EIA Expected Them in 2027

The EIA STEO published in early June 2026 projected a June-July Brent average of $105 per barrel. Thursday's price of $79.04 is roughly 25% below that forecast. The same report projected a 2027 annual Brent average of $79 per barrel, meaning the Islamabad MOU has compressed the price recovery timeline by approximately 18 months, pulling forward what the EIA modelled as a gradual post-conflict normalization into a single week of trading.

The OPEC Reference Basket averaged $114.55 per barrel in May, per OPEC's June Monthly Oil Market Report, as the Hormuz closure hit supply at its peak. Thursday's Brent at $79.04 represents a roughly $35 per barrel collapse from that May average in six weeks. The EIA also revised its 2026 global oil demand forecast to a net decrease of 1.1 million barrels per day, compared to growth of 1.2 million barrels per day projected before the conflict, with Asia absorbing the largest demand reduction.

Risk Floor Remains Through August

The 60-day MOU window runs through mid-August, and formal settlement terms still require negotiations on Iran's nuclear programme, frozen asset release, and Hormuz transit governance. Traders who pushed Brent below $80 are pricing in near-complete normalization. Any breakdown in those talks, or a delay in the Hormuz governance agreement with Oman, could rapidly reverse this week's price declines.