Oil falls on report of possible U.S.-Iran ceasefire deal

Oil prices turned lower as traders priced in the chance that more crude could flow again through the Strait of Hormuz, a move that would ripple quickly from futures to gasoline and inflation expectations. The market reacted to reports that U.S. and Iranian negotiators had reached a memorandum of understanding to extend their ceasefire for 60 days and lift restrictions on shipping, but the deal still awaited Donald Trump’s approval and Iranian state media said the text had not been finalized.

The retreat followed an already sharp week of selling. Reuters reported oil fell nearly 7% on May 25 and about 5% on May 27 as hopes for an agreement grew, pushing Brent below $100 a barrel and then toward the low $90s. By May 28, Bloomberg said Brent was down about 19% for May and heading for its biggest monthly drop since 2020, while West Texas Intermediate fell below $88 a barrel. CNBC also reported that oil prices pulled back after negotiators reached an agreement to extend the ceasefire.

The stakes are high because the Strait of Hormuz is one of the world’s most important energy chokepoints. According to the International Energy Agency, an average of 20 million barrels per day of crude oil and oil products moved through the waterway in 2025. At its narrowest point, the strait is only 29 nautical miles wide, with two-mile-wide navigable channels, leaving global shipping vulnerable to any disruption. Even the prospect of reopened or unrestricted transit can move benchmarks, and Axios said the proposed terms would allow shipping through the strait to be unrestricted.

That is why the reaction spread beyond crude. Reuters and Bloomberg noted gains in global equities and emerging-market assets as investors weighed the possibility of restored oil flows and less pressure on inflation. A meaningful easing of Middle East supply risk can quickly filter into expectations for transport costs, refinery margins and consumer prices, especially if traders conclude that Iranian exports could rise.

The ceasefire extension would also open negotiations on Iran’s nuclear program, a broader political test that remains unresolved. Trump said in a Truth Social post on May 25 that talks with Iran were “proceeding nicely,” while warning that if no deal was reached, attacks could resume on a scale “bigger and stronger than ever before.” U.S. Secretary of State Marco Rubio has said the Strait of Hormuz must be open “one way or the other,” underscoring how central the waterway has become to Washington’s strategy even as the market continues to trade on uncertainty rather than a finished agreement.