EARLY TRADING: US Energy Shares Fall as Iran Deal Lowers Hormuz Disruption Risk

June 15 (Reuters) – U.S. energy shares fell in premarket trading on Monday as crude prices tumbled after Washington and Tehran reached an initial ​deal that could end the months-long conflict and reopen the vital ‌Strait of Hormuz.

The U.S. and Iran will sign a memorandum of understanding in Switzerland on Friday, Pakistan’s prime minister said, after his country helped mediate talks between the two sides.

U.S. ​President Donald Trump said on Sunday the Strait of Hormuz, which carries ​roughly a fifth of global oil consumption, would be open “toll free” ⁠and that a U.S. naval blockade of Iranian ports would end.

“Markets will ​price in a large optimism discount that ‘normality’ is returning, although we would caution that ​flows are not likely to resume to anywhere near pre-war levels for months, and investors should follow how quickly Gulf producers are able to resume oil production and exports following ​damage from the war and whether more ships will enter the region,” said ​Ashley Kelty, analyst Panmure Liberum.

Brent crude futures fell 4.8% to $83.10 per barrel by 1047 GMT, ‌while ⁠U.S. West Texas Intermediate crude was down 5.2% at $80.46 per barrel.

Shares of Exxon Mobil  and Chevron  fell 2.6% and 2.5%, respectively.

Diamondback Energy , Devon Energy, ConocoPhillips and Occidental Petroleum  were down between 2.6% and 3.2%.

Refiners Valero Energy , Marathon Petroleum and Phillips ​66 also declined ​between 2.5% and ⁠3%.

In Europe, shares of BP fell 3.4%, while Shell dropped 4.3%.

Energy stocks had rallied since the conflict broke as concerns mounted ​that it could disrupt shipments through the Strait of Hormuz. ​Analysts cautioned ⁠that physical oil markets could take longer to recover than financial markets.

“Even if ships now have safe passage, tankers are in the wrong place, oil production/refining facilities ⁠need to ​get up to full capacity, and questions over ​the cost and availability of insurance for ships traversing the Strait will remain,” said Capital Economics ​group chief analyst Neil Shearing.

Reporting by Arunima Kumar in Bengaluru; Editing by Shilpi Majumdar