On June 19, the United States and Iran signed a framework in Geneva setting a 60-day roadmap toward a final peace agreement, and Washington granted Iran a 60-day license to sell oil and petroleum products on international markets. WTI crude has fallen to roughly $74 a barrel since, its lowest level since early March, while Brent has slipped to about $77, also a three-month low. The Canadian energy trade that has outperformed for four months on the assumption that the Strait of Hormuz would stay shut is now being asked to defend itself on different terms.
The Canadian Energy Trade This Unwinds
Suncor, Canadian Natural Resources, Cenovus, Imperial Oil and the broader TSX energy sub-index have traded higher since military action began on February 28, re-rated on the assumption that elevated oil prices, and the risk premium behind them, would persist. That re-rating was never really a bet on Canadian production growth or refining margins. It was a bet on a closed shipping lane half a world away. The 60-day license and the Geneva framework do not need to resolve the underlying conflict to test that bet. They only need to put barrels back on the water, and barrels are already moving.
Why a License Moves Oil Faster Than a Peace Deal Would
Iran has increased visible shipments through Hormuz to the highest level since the conflict began, cutting prices on cargoes sold to China to move volume. Kuwait has lifted its force majeure notices and the UAE's ADNOC has resumed supply operations. A full reopening of Hormuz could in theory release about 80 million barrels into the market. At the same time, several forecasters, including the US Energy Information Administration, have cut their 2026 global oil demand growth forecasts, citing the conflict's drag on trade flows. Supply returning and demand expectations falling at the same time explains the sharpness of the price decline better than the diplomatic headline alone.
The mechanism also explains why Brent and WTI have not moved together. The Brent-WTI spread widened to an average of $12 a barrel in March, peaking near $25 a barrel on March 31, the highest in over five years, because Brent carries more direct exposure to the shipping routes and regional flows around Hormuz while WTI was cushioned by strong US inventories. As the Hormuz premium drains out of the market, that spread should continue to compress.
The path below tracks Brent crude from before the conflict began through this week, showing both the scale of the run-up and the pace of the recent unwind.
April and May figures are EIA monthly averages rather than single-day prints; the two June points are daily spot prices. Source: US Energy Information Administration Short-Term Energy Outlook.
Tail Risk: The Lebanon Condition Iran Keeps Attaching
The market is currently pricing continued de-escalation as the dominant scenario, evidenced by oil extending its decline through this week despite a weekend wrinkle. Iran briefly announced over the weekend that it had again halted Strait traffic, explicitly tying further negotiation progress to an end to the conflict in Lebanon, even as tanker tracking data showed millions of barrels continuing to move through the chokepoint regardless. Iran's nuclear program is a second, separate flashpoint: Vice President JD Vance said Tehran had agreed to admit nuclear inspectors, a claim Iranian officials have denied outright. Either thread, Lebanon or the inspector question, looks like a more plausible trigger for the framework unraveling than a reversal of the oil license itself.
What Determines Whether the Window Holds
The clearest real-time signal here is not the diplomatic language but the tanker data. Continued Gulf producer ramp-up from Kuwait and the UAE, alongside continued Iranian shipments at a discount to Chinese buyers, suggests market participants are pricing the framework as durable enough to act on rather than waiting for a final signature. The most relevant marker for Canadian portfolios over the rest of the 60-day window is not a specific date so much as a pattern: any verified interruption to Hormuz traffic that holds for more than a news cycle would be the signal that the de-escalation case is breaking down, and it would matter more to Canadian energy valuations than anything said in Geneva.