Oil prices sink as U.S. and Iran push peace deal talks

Oil traders treated diplomacy like a live scoreboard on Monday, sending Brent crude down more than 4% to $99.10 a barrel and U.S. West Texas Intermediate to $92.24 after signs that Washington and Tehran were edging closer to a peace deal. Both benchmarks briefly hit their lowest levels since May 7, a sharp reminder that every shift in the talks is feeding straight through to energy prices, gasoline expectations and broader inflation pressure.

The move came after Donald Trump said the agreement was “largely negotiated” and would be announced shortly, following calls with leaders in Saudi Arabia, the United Arab Emirates, Qatar, Pakistan, Turkey, Egypt, Jordan and Bahrain, as well as Israeli Prime Minister Benjamin Netanyahu. Trump also said the deal would reopen the Strait of Hormuz, the narrow waterway that carried about a fifth of global oil and liquefied natural gas shipments before the conflict.

But the diplomacy remained unsettled. On Sunday, Trump urged caution and said not to rush into a deal. Marco Rubio put the choice more starkly, saying there would either be a good agreement or Washington would deal with Iran in another way. Iran’s foreign ministry offered a more guarded account on Monday, saying understandings had been reached on many issues but that an agreement was not imminent. Esmaeil Baqaei said Iran had reached conclusions on a large portion of the topics under discussion, but that no one could claim a signing was close.

The gap between the two sides is still wide on the core terms. Iran’s officials said the talks were about ending the war, not nuclear issues. Fars News Agency rejected Trump’s framing and said the Strait of Hormuz would remain under Iranian management. Reporting around the proposed first phase points to a memorandum of understanding, some unfreezing of Iranian assets held in foreign banks, a 30-to-60-day window for broader talks and, according to CBS News, a process in which Iran would agree in principle to dispose of highly enriched uranium.

Analysts warned against overreading the rally in optimism. Warren Patterson of ING said markets have a habit of getting ahead of themselves when talks appear close. Giovanni Staunovo of UBS said traders were still watching physical flows, which remained restricted. That caution was visible in the shipping data: two LNG tankers were leaving the strait on Monday, and a stranded Iraqi crude tanker had finally departed after nearly three months.

If the talks slip, the consequences reach well beyond crude futures. A prolonged disruption in the Strait of Hormuz would keep pressure on gasoline prices, complicate the fight against inflation and leave global shipping exposed while damaged oil and gas facilities are repaired.