Tehran (ISNA) - Brent crude oil fell $4.08, or 4.7 percent, to $83.25 per barrel, while US West Texas Intermediate crude fell $4.35, or 5.1 percent, to $80.53 per barrel.
Both benchmarks, after falling more than 3 percent on Friday, reached their lowest levels since March 10 on Monday.
Pakistan's Prime Minister, whose country has served as mediator, announced that Iran and the United States would sign a memorandum of understanding in Switzerland on Friday. US President Donald Trump said on Sunday that the Strait of Hormuz would be opened and the US naval blockade of Iranian ports would also end.
Tim Waterer, senior market analyst at KCM Trade, said: "The geopolitical risk premium that had been built into crude oil is now rapidly deflating, as traders price in the prospect of oil flows resuming."
The world has lost millions of barrels of oil and gas for more than three months since the Strait of Hormuz – which transits one-fifth of the world's oil and liquefied natural gas – became unsafe for vessel transit following the US-Zionist aggression against Iran.
Investors are also cautiously watching how quickly Middle Eastern producers can resume oil production and exports after war-related damages, and whether more vessels will enter the region.
Vivek Dhar, commodity strategist at Commonwealth Bank of Australia, wrote in a note: "While these uncertainties represent upside risks to our forecast for Brent crude to reach $80 per barrel by the end of the year, it is worth noting that oil flows through the Strait of Hormuz only need to reach 60 to 70 percent of pre-war levels for oil markets to return to pre-war oversupply expectations."
According to Reuters, Priyanka Sachdeva, senior market analyst at Phillip Nova, said: "Beyond the immediate price reaction, attention will now turn to the speed of actual supply normalization and adherence to the agreement. While the conflict may have ended and oil flows through the Strait of Hormuz may gradually return to normal, the damage incurred cannot be repaired overnight. This includes not only any physical damage to oil infrastructure but also the economic strain imposed on oil-importing economies that have been facing high energy costs for months."
