Key Points
The United States and Iran announced a deal to end the Iran war over the weekend.
The peace agreement will not be officially signed until Friday.
Oil prices are already dropping anyway.
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Oil prices crashed again Monday morning, with Brent crude futures falling 5.6% and WTI down 5.9% through 10:50 a.m. ET.
As you'd expect, oil stocks are following oil prices lower, with Chevron Corp (NYSE: CVX) stock down 3.1% -- but here's the thing: A 3.1% drop in Conoco stock is only about half the drop in Brent prices, for example.
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So why isn't Chevron stock down even more?
Image source: Getty Images.
Peace in the Middle East
Let's start with the obvious: why oil prices are dropping at all today. Over the weekend, President Trump announced he has reached a peace deal with Iran. The Strait of Hormuz will open toll-free, and the U.S. naval blockade on Iran will simultaneously cease, and "oil will flow on both ends again for the Region, and the World!"
Iran confirms the peace deal, affirming that fighting will cease "immediately and permanently." Oil investors are selling their shares in anticipation that free-flowing Persian Gulf oil will rebalance supply with demand, causing prices -- and profits -- to drop.
This may be exactly what happens next.
What this means for Chevron stock
Or it may not.
Media reports on the peace deal, which won't be officially signed until Friday, conflict on or omit multiple details, for example, on how (or if) Iran's stockpiles of enriched uranium will be seized and disposed of, and whether the U.S. will pay reparations or unfreeze Iranian foreign assets.
Until these details are firmed up -- and acted upon -- it's difficult to call the conflict really over. And there's always the possibility that a peace deal will be violated and the Strait will be bottled up all over again.
Long story short, oil prices and Chevron's stock price are both down today. There's no guarantee either one will stay down for long.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
