European oil shares fall as US-Iran peace deal drives crude prices down

Shares of European oil companies declined on Monday following the announcement of a 14-point draft agreement between the United States and Iran. Iranian reports indicate that the deal includes a permanent ceasefire on all fronts, including Lebanon, the lifting of the US naval blockade against Iran, and a US commitment not to interfere in Tehran’s domestic affairs. Crucially, the agreement involves the reopening of the Strait of Hormuz within 30 days under Iran’s regulations, as well as the lifting of sanctions on Iranian oil and energy products.

Market reaction

Brent crude oil dropped 5% following the news. While broader markets traded positively on the prospect of reduced geopolitical risk, oil companies’ shares suffered as investors anticipated that the profit growth seen during the war period would eventually end. TotalEnergies and Shell shares fell 4.8% and 4.7%, respectively, by 1200GMT. Italian Eni shares declined 4.3%, UK-based BP lost 3.6%, and shares of Greek Motor Oil Hellas fell 3.9%. Analysts noted that trade flows in the strait are estimated to take months to return to normal, and a full recovery in supply is expected to take a long time.