An Oil Deal That Ended a War Nobody Won

What happened today is best described, despite much more dramatic categorizations coming out of Tehran and Washington, is a 60-day ceasefire extension, now reportedly signed by both parties, that reopens the Strait of Hormuz, while the original alleged reason for going to war, the nuclear weapons issue, stays open on the negotiating table. Both sides are buying time in order to get the oil flowing through Hormuz.

So, today’s deal is an oil deal, first and foremost. It’s not a victory for anyone. It’s just bringing things full circle back to before the conflict started–plenty lost, nothing gained (in the national interest).

The framework for this much-heralded deal is set to be formally signed in Switzerland on Friday, at which point Hormuz would be reopened and the U.S. Navy would free Iranian ports. What exactly will be signed on Friday remains largely a mystery. The bulk of the reported agreement remains under wraps, and the rest seems to remain open to interpretation.

What About Iranian Assets?

One of the first major disagreements has already surfaced over frozen Iranian assets, and a tricky problem of political coverage in both Washington and Tehran.

Iranian media outlets and officials have claimed that the framework provides access to $24 billion in frozen Iranian assets during the 60-day implementation period, with $12 billion becoming available before negotiations begin.

If this is true, then the Trump administration is backing down from one of its key demands: no unfreezing of assets without a nuclear agreement.

Now, the Trump administration is pushing back on that narrative, with Vice President JD Vance saying later on Monday that reports of billions of dollars of Iranian assets being unfrozen were “not true”. At the same time, Vance acknowledged that discussions about frozen assets remained possible. Tehran needs this news in the public and Trump needs it to stay quiet, and rocking that boat could impede the signing of a deal on Friday.

The Biggest Oil Question Remains Unanswered
Will Iran’s oil exports eventually be restored? Not today, and not on Friday, either, if we are to bank on statements by Trump and Vance, both of whom have publicly pushed back against reports that sanctions relief is already part of the deal.

On Monday afternoon ET, Trump said explicitly that any future easing of sanctions would be tied to Iranian behavior and compliance rather than granted immediately as part of the MoU. Trump also said the text of the agreement would be released “soon”.

Tehran, on the other hand, is portraying the agreement as the beginning of Iran’s economic reintegration into global markets.

Before the war, Iran was exporting more than a million barrels per day, primarily to China. The U.S. blockade severely disrupted those flows and cut off a major source of revenue for Tehran.

President Trump said Monday that the agreement does not include immediate sanctions relief and that the full text will be released soon.

Before the war, Iran was already exporting significant volumes of crude despite U.S. sanctions, primarily to China. The next phase of negotiations will determine whether Washington leaves those restrictions in place, grants sanctions waivers, or eventually removes sanctions altogether.

Even if sanctions were eased today, additional Iranian barrels won’t appear in an instant flood. More buyers would need to return, shipping and insurance arrangements would need to normalize, financing channels would need to reopen and refiners would need time to incorporate more Iranian crude. It’s a process that would take months.

The same is true across the Gulf. Reopening Hormuz won’t instantly restore energy flows to pre-war levels. After three months of disruption, hundreds of vessels are backed up inside and outside the Gulf, and regional producers have reduced output, delayed cargoes and changed export schedules to accommodate the Hormuz crisis.

Shipping companies, insurers and energy traders are also waiting to see what “reopened” actually means in practice. This is the last industry that’s going to blindly follow media headlines.

Mine clearance operations are expected to continue after Friday’s signing ceremony, but insurers are nervous about lowering war-risk premiums until safe shipping corridors are established and commercial traffic resumes consistently. That consistency will still come at a premium price, then.

Analysts cited by AP estimate that energy flows through Hormuz may not return to roughly 80% of prewar levels until September, while a full normalization could take considerably longer.

In other words, it was a lot easier to close Hormuz than it has been to open it.

The Lebanon Problem
The biggest unanswered question is really Lebanon.

Iranian officials, Pakistani mediators, and Hezbollah view the deal as necessarily including an end to Israeli military operations in Lebanon.

In fact, hours before the agreement was announced, Israeli aircraft struck targets in Beirut. Israeli Defense Minister Israel Katz subsequently stated that Israel would not withdraw from the territory it currently controls in southern Lebanon.

Washington and Tehran may have reached an understanding on Hormuz, sanctions negotiations, and a 60-day ceasefire period, but neither Israel nor Hezbollah was a party to those negotiations. The deal is fragile, and if fighting resumes in Lebanon, it could disappear before it’s even been signed. That puts the ball in Israel’s court.

Later on Monday, Israeli Prime Minister Benjamin Netanyahu asserted that Israeli forces would stay in Lebanon (as well as Gaza and Syria) for “as long as necessary”, reiterating that Tel Aviv was not bound by the U.S.-Iran deal and was under no obligation to withdraw from Lebanon.

By Charles Kennedy for Oilprice.com