Brent Gaps Down and Continues Sliding on US-Iran Peace Agreement

In the news, the US and Iran are set to sign a memorandum of understanding in Switzerland this Friday (19 Jun), according to Pakistan's prime minister, whose country has acted as a mediator. Trump announced on Sunday that the Strait of Hormuz would be reopened "toll-free" and that the US naval blockade of Iranian ports would be lifted. Iran's semi-official Mehr news agency reported that the draft agreement proposes reopening the Strait of Hormuz within 30 days, under Iranian arrangements. Market players have been preparing for a deal for several weeks, with ICE COT data (for w/e 09 Jun) showing a third consecutive reduction in Brent money-managed longs, while managed shorts increased for a tenth straight week. However, it will likely take multiple months for traffic through the Strait to recover, as insurance and security concerns continue. The deal also remains fragile, as reports of new Israeli attacks on southern Lebanon have been reported early this morning, despite the peace deal that, according to Tehran, included a halt to attacks on Lebanon. Elsewhere, ADNOC has launched a tender to sell crude oil from the United Arab Emirates, marking its third since the beginning of this month. The company is offering cargoes of Upper Zakum, Umm Lulu, and Das crude for loading between Jun and Aug. Buyers can bid for up to 2mb; the crude grades are sourced from fields within the Gulf and are exported via the Strait of Hormuz. In other news, Japanese shippers welcomed the US-Iran peace deal, which will reopen the Strait of Hormuz, but are awaiting more details and clearance of mines before allowing ships to pass. A spokesperson for the Japanese Shipowners’ Association said they welcomed the agreement but “wanted to wait a little longer for more concrete information” on Friday, when the pact is scheduled to be signed. There had been reports of mines being laid in the area, and the spokesperson added that they cannot act solely on the basis of the agreement news. Nippon Yusen, Japan’s largest shipper, hopes operations will return to normal soon, but it’s too early to comment on schedules for the stranded vessels. Finally, at the time of writing, the front-month (Aug/Sep) and 6-month (Aug/Feb) Brent futures spreads are at $0.66/bbl and $4.23/bbl, respectively.

This morning Brent/Dubai initally opened unchanged, with Dubai spreads lower across the board. Backend Dubai spreads were well bid, with Aug/Dec Dubai spreads trading. This meant the Jul/Aug Brent/Dubai box opened around 20c higher, whilst backend boxes opened around 10c lower. Into the window we saw selling on screen of Jul/Aug Dubai spread, and the Jul Brent/Dubai went well bid into 9:30 BST, trading up from $4.50/bbl to $5.20/bbl. We saw continued products and trade selling of Q4 Brent/Dubai between $2.80/bbl to $3/bbl. The Dubai spreads are now in contango, and close to going negative in all of 2026.

VLSFO had a weaker start to the day with a fair amount of bearish sentiment in the market. There was an axed seller pre-window on screen on the Jul Sing crack, which resulted in the front trading down to $11.30/bbl. The crack did recover somewhat into the window as well as post, closing out the first half of the day at $11.50/bbl. Spreads were offerside the majority of the morning, however, liquidity was fairly low, which saw lower traded volumes. Jul/Aug traded down to $14.50/mt from Friday's close of $17.75/mt. Euro 0.5 was weaker off the back of Sing 0.5 selling; however, interest was very low to start the week. The front crack was supported, particularly due to a lack of selling combined with the fact the front E/W was fairly weak.

In HSFO, 380 opened weaker this morning with E/W sell side in both Jul and Aug. Combined with selling on 380 vs Dated cracks in August, the Jul 380 crack sold down to -$5.30/bbl. Spreads were also offered with Jul/Aug trading down to $5.25/mt from Friday's close of $8.00/mt. The majority of selling on the front 380 spread came via fly selling in Jul/Aug/Sep 380, which traded in large volume. Barge crack was stronger based off E/W selling, trading up to -$8.00/bbl from -$8.30/bbl. Barge spreads were largely quiet this morning with not much working OTC. Jul/Aug barges was implied down to $2.25/mt.

This morning in distillates, Sing gasoil spreads were scale back offered, with Aug/Dec trading up 20c to $8.75/bbl. E/W opened with aggressive bids in Q4'26 and Cal'27, getting sold into. Front E/W then turned well offered, dropping from -$31.25/mt to -$34/mt, with Q4'26 coming back in bid and trading up to -$32/mt. Regrade was sellside with Jul getting hit on screen down to -$0.85/bbl and kero spread bids getting sold into, with Jul/Aug trading down 40c to $1.60/bbl.

Prompt ICE gasoil spreads opened weak, then rallying from $16.25/mt to $18.25/mt through the window. Aug cracks saw similar flows, rising from lows of $40/bbl to reach $41.30/bbl. European jet diffs sold off aggressively, dropping $10 to trade at $66/mt in Jul. Heating oil trading rangebound while the M1 HOGO swap sold off from 31c/gal to 30c/gal.

This morning in gasoline, Sing 92 flat price traded end window at $100.40/bbl with MOC better bid. Gasoline was initially better offered before bouncing back during the window. 92 cracks sold off from $18.35/bbl to $17.40/bbl before recovering to $18.35/bbl. Spreads opened lower on weaker Brent, with Jul/Aug trading at $3.80/bbl, but firmed to $4/bbl post-window. July E/W was valued at -$6.75/bbl, with EBOB cracks seeing mixed interest as they traded at $25/bbl. Jul/Aug opened at $20.50/bbl but got bid up from tradehouses to $22.50/mt.

This morning in NGLs had a very quiet window following the weekend headlines and crude move. Had some FEI spread interest, with Jul/Aug trading at $24/mt and Oct/Nov at $4/mt, compared to last week’s close of $32/mt and $6/mt, respectively. In CP, Jul/Aug was trading at $50/mt across the morning, but came off slightly end window to settle at $48.50/mt. Had some Q4 FEI/MOPJ selling at -$52/mt, a similar level to last week’s close. End window Jul FEI flat price was hit on screen at $647/mt. MOC better bid on the day.

This morning in naphtha, MOPJ MOC better bid with phys lifting +5c in July and Aug MOC. Prompt MOPJ flat price spreads better offered on lower crude, seeing July/Aug MOPJ get hit down to $2/mt with E/W coming off also, seeing July trading $30/mt end of window with sell side interest in Q4, which trades down to $30.50/mt. July naphtha crack trades up from -$9.70/bbl to -$9.45/bbl, with the Cal'27 crack trading -$9.90/bbl in the morning and getting lifted -$9.75/bbl end of window.

Risk On with the Middle East news, Brent falling $3.8 sends the Nasdaq futures up 3%, while 2-year yields fall 6bp on reduced inflation expectations. Precious metals also jump, silver +3.5% higher, gold +2.6%

The US government's suspension of Claude Fable 5 & Mythos 5 confirms frontier AI is now a national security asset, not just a growth story. This isn't a TAM collapse - it's the government demanding privileged access before China can copy it. That accelerates the buildout. Markets haven't priced this shift yet.

SpaceX IPO'd the same week at ~90x revenues - peak optimism in one ticker. But with ~$200B in AI IPOs potentially hitting markets this year, 20-year-high Treasury yields, and Gundlach comparing this to DotCom-era "drunken sailor" spending by unprofitable companies, the liquidity math gets complicated fast. Pimco is already flagging a reasserting default cycle in lower-quality credit.

Meanwhile the macro backdrop is quietly deteriorating: AI is driving inflation higher - software prices +14.5% YoY and electronic components +27%, both records. The Middle East news should see temporary relief to the economic concerns. Yet small business hiring intentions just hit a 10-year low outside of 2020. Yet tech funds saw $12.3B in inflows last week alone, the largest since 2017 (Chart, BofA Global Research), and US households now hold 45.8% of financial assets in equities - above the 38.7% peak of the dot-com bubble.

Other signals worth watching: CME launching 24/7 crude and gold contracts, copper hitting an all-time weekly close, BOJ raising rates to a 30-year high of 1%, and solar surpassing coal in US electricity production for the first time.

If you missed out on Friday, the 2X and 3X levered SPCX ETF 's will start trading today (long and short). For gamblers, not investors.

Other signals worth watching: CME launching 24/7 crude and gold contracts, copper hitting an all-time weekly close, BOJ raising rates to a 30-year high of 1%, and solar surpassing coal in US electricity production for the first time.

If you missed out on Friday, the 2X and 3X levered SPCX ETF 's will start trading today (long and short). For gamblers, not investors.