Shares in integrated oil major Chevron (NYSE: CVX) declined by 5.3% by 11 a.m. today. There's no arguing over the reason: the 15% drop in oil prices as a consequence of the agreement for a two-week ceasefire between the U.S. and Iran.

Investors have been buying stocks like Chevron to hedge against the risk of a prolonged conflict and its impact on global energy prices. As such, when that risk recedes, as it appears to have done today, it's understandable if the market reacts by selling off oil and stocks like Chevron, which are bought as proxies for oil prices.

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Still, it's worth taking a step back and looking at the bigger picture here. The 15% drop in oil prices just means it's trading at about $95 per barrel at the time of writing, a significant premium to the $58 per barrel it traded at at the start of the year.  That's good news for Chevron's upstream (exploration and production) interests.

Moreover, refining crack spreads (the difference between the price of crude oil and petroleum products like gasoline) remain elevated. For example, the 3-2-1 crack spread, which measures the difference between the costs of three barrels of crude, two of gasoline, and one of diesel, remains elevated at $42, up from less than $at the start of the year. That's good news for Chevron's downstream (refining margins).

The reality is that crude oil supplies and refined product supplies from the Persian Gulf will take time to recover to pre-conflict levels, if at all.

Furthermore, the agreement is a ceasefire, not a comprehensive peace deal, and many points in the official Iranian and widely reported U.S. versions are incompatible, particularly regarding the conditions for reopening the Strait of Hormuz and who will have long-term control over it. Until these matters are resolved, Chevron remains an excellent way to hedge risk in the current environment.

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Lee Samaha 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.

Here's Why Shares in Chevron Slumped Today was originally published by The Motley Fool