Brent Sinks 4.76% as Citi Slashes Q3 Forecast to $75: Traders Brace for Supply Wave

Oil markets endured a seismic repricing on Monday, with Brent and WTI plummeting over $4 per barrel to three-month lows after President Donald Trump announced that the United States and Iran had signed a memorandum of understanding to end their war and reopen the Strait of Hormuz. The immediate catalyst was the removal of a months-long war-risk premium embedded in crude futures. Brent settled down 4.76% at $83.17/bbl, while WTI fell 4.87% to $80.75, both levels not seen since March 4, 2026. The deal, signed by Trump, Vice President JD Vance, and Iranian parliament Speaker Mohammad Bagher Qalibaf, sets the stage for a formal signing ceremony in Geneva on Friday and a reopening of the strategic waterway within 30 days. This development promises to resolve one of the most severe supply chain disruptions in recent memory: the Strait of Hormuz, chokepoint for a fifth of global oil and LNG flows, has been closed for over three months, choking off millions of barrels daily and forcing costly rerouting. The sell-off was vindicated by market participants. Dennis Kissler of Bok Financial noted, “With a wall of oil supply very possibly on the way, the selloff looks justified.” In a preemptive move, Iran slashed the official selling price for its light crude to Asian buyers by nearly $6 to $7.15/bbl above the Oman/Dubai average for July. Citi quickly slashed its average Brent forecasts to $75 for Q3 and $70 for Q4, anticipating that trade flows will normalize. The market now grapples with the logistics of restarting production and shipping, the demand implications of suddenly cheaper crude, and the potential for a protracted supply glut. While consumers and energy-intensive industries may cheer lower input costs, the geopolitical détente introduces fresh volatility: how swiftly can tanker fleets redeploy, how will OPEC+ react to a resurgent Iranian barrel, and will this deal hold? The coming weeks will test both the physical supply chain's resilience and the financial market's ability to price in an abrupt regime shift. Beyond immediate price action, the deal reshapes global energy geopolitics, potentially easing inflation pressures but also complicating the policy calculus for the energy transition, as abundant cheap oil could dampen the momentum behind renewable investments.