Why ConocoPhillips Stock Dropped Again Monday

Oil prices crashed again Monday morning, with Brent crude futures falling 5.6% and WTI down 5.9% through 10:40 a.m. ET.

As you'd expect, oil stocks are following oil prices lower, with ConocoPhillips (NYSE: COP) stock down 3.9% -- but here's the thing: A 3.9% drop in Conoco stock is a lot less than a 5.9% drop in Brent prices, for example.

So why isn't Conoco 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!"

Statements from Iran confirm the peace deal and that fighting will cease "immediately and permanently." Oil investors are selling their shares in anticipation that greater oil supplies will rebalance supply with demand, causing prices -- and profits -- to drop.

This may be exactly what happens next.

What this means for ConocoPhillips

Or it may not.

Media reports on the peace deal, which won't be officially signed until Friday, conflict 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 as part of the deal.

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 Conoco's stock price are both down today. There's no guarantee either one will stay down for long.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.