Oil markets just had one of those days. Reports that the US and Iran are finalizing a diplomatic agreement sent crude prices into a nosedive, with West Texas Intermediate falling to $98.26 per barrel and Brent crude settling at $105.02, a decline of roughly 6%.
What’s driving the plunge
The core issue is the Strait of Hormuz. About 20% of the world’s oil supply transits through this narrow waterway between Iran and Oman. When tensions flare between Washington and Tehran, traders immediately start pricing in the possibility that those shipments get disrupted. When tensions ease, that premium unwinds. Fast.
President Donald Trump indicated that negotiations between the two countries are nearing completion. The market’s response was immediate and decisive.
This isn’t even the sharpest drop this month. On May 6, Brent crude fell as much as 12% in a single session on earlier speculation about the peace talks, while WTI dropped between 7% and 11%.
