Energy shares drop as Iran deal reduces Hormuz disruption risks

U.S. Energy shares fell on Monday in premarket trading as crude prices dropped after Washington and Tehran reached a preliminary deal that could end the months-long conflict and open?the Strait of Hormuz.

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U.S. president Donald Trump announced on Sunday that the Strait of Hormuz would be "toll-free" and a U.S. navy blockade of Iranian ports would cease.

Investors should monitor how quickly Gulf producers can resume oil production and exports after the war, as well as whether or not more ships enter the region, said Ashley Kelty of Panmure Liberum.

Brent crude futures dropped 4.8% to $83.10 a barrel at 1047 GMT while U.S. West Texas intermediate crude fell 5.2% to $80.46 a barrel.

Exxon Mobil shares fell by 2.6%, while Chevron shares dropped by?2.5%.

Diamondback Energy and Devon Energy were both down between 2.6% to 3.2%. ConocoPhillips, Occidental Petroleum, and Devon Energy also fell.

Also, the refining companies Valero Energy and Marathon Petroleum as well as Phillips 66?decreased between 2.5% to 3%.

Shell shares fell?4.3% in Europe while BP shares dropped?3.4%.

Since the conflict began, energy stocks have rallied as fears that it may disrupt shipments through the Strait of Hormuz have grown. Analysts warned that the physical oil market could take longer to recover than financial ones.

Even if the ships have a safe passage now, the tankers are still in the wrong place. The oil production/refining plants?need a boost to reach full capacity. And questions will remain about the cost and availability for insurance to cover ships that cross the Strait, said Capital Economics Group chief analyst Neil Shearing.

(source: Reuters)