The Peace Deal
Over the weekend, the United States and Iran announced an agreement that ends the war and reopens the Strait of Hormuz. Pakistan mediated the talks, and the formal signing is scheduled for Friday, June 19, in Switzerland. The agreement calls for an immediate and permanent end to military operations on all fronts, including Lebanon. The U.S. naval blockade is being lifted and the Strait is reopening for commercial traffic in the coming days, with full reopening expected within roughly 30 days of the formal signing.
The deal is best understood as an interim framework rather than a final settlement. Several important issues remain open. Iran’s nuclear program will be addressed through a separate track involving the U.K., Germany, France, Italy, and the International Atomic Energy Agency, with European nations signaling they are willing to lift sanctions in exchange for verifiable steps. Iran’s missile program and its support for regional militias are not addressed in this initial agreement. Israel is not a party to the deal, and Prime Minister Netanyahu has publicly said Israel will continue to act unilaterally if needed to prevent Iran from obtaining nuclear weapons. The harder questions are still on the table, but the fighting between the U.S. and Iran is over and the world’s most important oil shipping lane is opening back up.
The Supply Picture Behind the Headlines
Five months of war pulled an extraordinary amount of oil out of the global market. Roughly 1,500 vessels were sitting in the Persian Gulf as of late May, loaded with crude, natural gas, fertilizers, and refined products. Onshore storage across Saudi Arabia, Iraq, Kuwait, the UAE, Qatar, and Iran is at or near capacity. Iran has been managing rolling production cuts to protect its fields, and other Gulf producers shut in a combined 9 to 10 million barrels a day at the peak of the war. Total stranded supply estimates range from 880 million to 1.4 billion barrels worldwide, which works out to roughly two weeks of global oil consumption.
OPEC has already approved production increases for May and June rather than cuts, and the UAE exited OPEC on May 1. With the blockade lifted and the Strait open, this oil will start moving in earnest over the coming weeks. Tankers that have been idling will sail. Producers will draw down storage. The infrastructure to load and move the oil is largely intact and ready to operate.
Why the Market May Be Underestimating This
Brent crude is trading around $83 a barrel after a sharp drop on the news, with both Brent and WTI hitting their lowest levels since early March. Major bank forecasts cluster in the $75 to $90 range for the rest of the year. Those numbers assume an orderly normalization with supply coming back in measured steps. The actual setup may produce something different. The volume of trapped oil is larger than any supply overhang in modern history. Even partial release of that backlog represents a meaningful flood of supply hitting a market that has already started to soften.
The second piece, which the market seems to be underweighting, is the demand side. Refiners and governments will likely be slow to refill inventories at current prices. Buyers know more oil is coming. The natural response is to work down existing stockpiles first and wait for prices to fall before restocking. China already holds record strategic reserves of roughly 1.4 billion barrels, built up while prices were low in 2024 and 2025. They are well positioned to be patient. Other major importers including Japan, South Korea, and India released strategic reserves during the war and will probably wait for lower prices before rebuilding. The buyers have leverage. The sellers need to move product.
The Biggest Risk Worth Watching
Israel is the most significant risk to this outlook. Israel was the lead military partner alongside the U.S. through five months of war, but it is not a signatory to the peace deal. Prime Minister Netanyahu held a press conference yesterday saying Israel will continue to act on its own if necessary to prevent Iran from obtaining nuclear weapons. The Israeli public and political establishment have reacted with frustration, with critics arguing the U.S. pulled Israel out of the conflict before its objectives were complete. The relationship between Washington and Jerusalem is reportedly strained, particularly after Israel struck Beirut in the hours before the deal was finalized.
If Israel were to launch unilateral strikes on Iran, the ceasefire would be at serious risk and oil could spike back toward the levels we saw during the war. That is the tail risk to manage in the months ahead. The base case is still that the deal holds, because Israel depends heavily on U.S. support and the U.S. has substantial leverage to keep things in place.
What Lower Oil Could Do for Inflation
Crude oil makes up roughly half the cost of a gallon of gasoline. Every $10 drop in oil takes about 25 cents off pump prices and a few tenths of a point off headline inflation. If oil moves toward the $50 to $60 range over the second half of the year, headline inflation could come down by close to two percentage points. Diesel, freight, food, fertilizer, and petrochemical costs would ease in the same direction. The effect is a meaningful real income boost for consumers who have been squeezed at the pump.
Oil is one piece of the inflation puzzle, not the whole picture. Services inflation, wages, and shelter costs have been stubborn, and those components are unlikely to ease just because crude prices fall. The Federal Reserve will probably need to see broader progress before cutting rates. But a meaningful drop in oil would still be a clear positive on the inflation front and would take real pressure off the consumer in the coming months.
The Bottom Line
The war between the U.S. and Iran is probably over, and the most important oil chokepoint in the world is opening back up. The harder questions about Iran’s nuclear program and missile capabilities remain on the table, but the immediate crisis is behind us. The supply side of the oil market is set up for a meaningful price reset, and the demand side is positioned to let that reset run further than the consensus expects. None of this outcome is guaranteed. OPEC could attempt to defend prices, demand could surprise to the upside, or Israel could act unilaterally and reignite the conflict. But the weight of the evidence points to lower oil, lower gasoline prices, and easier inflation through the back half of the year.
None of this changes how we think about portfolios. Diversification across regions, sectors, and asset classes is built for situations exactly like this one, where conditions can shift quickly in unexpected directions. The clients who stayed the course through five months of war headlines are now positioned to benefit from the recovery. As always, if your situation or goals have changed, please reach out. Otherwise, the best action remains the one we have recommended all along: stay invested, stay diversified, and let the plan do its work.
Disclosure
This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Facts presented have been obtained from sources believed to be reliable, though Gryphon cannot guarantee their accuracy or completeness. Gryphon does not provide tax, accounting, or legal advice. Individuals should seek such guidance from qualified professionals based on their specific circumstances.