TLDR
- Crude benchmarks tumbled on Sunday following Trump’s announcement that a US-Iran agreement would come “shortly”
- Brent crude declined 4.9% to $98.45 per barrel; WTI dropped 5.4% to $91.38
- The strategic Strait of Hormuz has remained shut since late February, removing approximately 1 billion barrels from worldwide markets
- Critical obstacles persist, including Iranian asset freezes and Tehran’s nuclear enrichment activities
- American energy companies increased their oil and gas drilling operations for the fifth consecutive week, marking the longest expansion since February 2025
Crude oil markets experienced significant declines Sunday and continuing into Monday following President Trump’s statement that Washington and Tehran were nearing an agreement to reopen the strategically vital Strait of Hormuz.
Brent crude declined 4.9% to reach $98.45 per barrel. West Texas Intermediate dropped 5.4% to settle at $91.38. Both major oil benchmarks recorded their weakest performance since May 7.
Trump announced on Saturday that negotiations had been “largely completed” and an official announcement would follow soon. His Truth Social post indicated the framework awaited final approval among the US, Iran, and additional participating nations.
However, by Sunday, Trump adopted a more measured tone. He emphasized that Washington would not accelerate into an agreement prematurely and that momentum favored American interests. He subsequently clarified that negotiations “aren’t even fully completed yet.”
Secretary of State Marco Rubio indicated additional developments might emerge Sunday, though Bloomberg reported that US officials confirmed the country wasn’t prepared to finalize any agreement.
What’s Still Holding Up a Deal
The negotiating parties continue to disagree on multiple critical elements.
Tehran has demanded the release of its frozen financial reserves currently held by the US Treasury Department. Washington has maintained its refusal. Iran’s Supreme Leader Ayatollah Mojtaba Khamenei declared last week that Iran’s enriched nuclear stockpiles cannot leave Iranian territory, directly contradicting a fundamental American requirement.
Iran’s foreign ministry characterized discussions as reaching the “final phase” of preparing a memorandum of understanding. However, government-controlled media outlets warned the negotiations could still fall apart.
Should an agreement materialize, it would potentially encompass a comprehensive ceasefire, reopening of the Strait of Hormuz, and phased reduction of sanctions targeting Iranian petroleum exports. Nuclear-related matters would be addressed through subsequent diplomatic efforts.
Why the Strait of Hormuz Matters
The Strait of Hormuz facilitated approximately one-fifth of global oil and liquefied natural gas transport before hostilities commenced in late February.
Since its closure, worldwide petroleum markets have experienced the removal of roughly 1 billion barrels of supply, according to International Energy Agency calculations. This represents the most severe supply disruption ever documented.
Market analysts caution that even following a signed agreement, restoring normal crude flows could require several months as damaged infrastructure undergoes necessary repairs.
“We’ve witnessed similar optimistic stages previously, only to see negotiations collapse,” stated Warren Patterson, head of commodities strategy at ING. “The market will probably exercise greater caution before reacting dramatically.”
MST Marquee analyst Saul Kavonic observed there is currently “some light at the end of the tunnel,” though significant uncertainties persist.
Within the United States, energy producers expanded oil and gas drilling operations for the fifth consecutive week. The operational rig count increased by seven to reach 558 during the week ending May 22, representing its strongest level since June 2025. Baker Hughes reported the total remained 1% below year-ago figures.
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