Oil markets had one of their most dramatic sessions in months on May 6, with both major crude benchmarks plunging after reports surfaced that the US and Iran are closing in on a framework agreement. Brent crude fell more than 11% intraday, briefly dipping below $100 per barrel. West Texas Intermediate followed the same script, sliding over 11% to trade below $91 per barrel.
The catalyst: a reported one-page draft deal that would reopen the Strait of Hormuz, establish an immediate ceasefire, and lay groundwork for renewed nuclear negotiations. Axios, Bloomberg, and Reuters all confirmed progress on the framework, giving traders enough confidence to aggressively unwind the geopolitical risk premium that had been baked into crude prices for months.
Why the Strait of Hormuz matters this much
Roughly a fifth of the global oil supply passes through this narrow waterway between Iran and Oman every single day. When tensions flare around it, traders price in the possibility that millions of barrels could vanish from the market overnight. When those tensions ease, the premium evaporates just as fast.
The draft agreement reportedly goes beyond just the shipping lane. It includes provisions for nuclear negotiations, which suggests both sides are treating this as more than a temporary de-escalation.
