Oil Prices Plummet as U.S. and Iran Edge Toward Deal to Reopen Strait of Hormuz

Global oil prices tumbled and equities rallied on Friday after U.S. President Donald Trump announced the cancellation of planned military strikes on Iran, claiming a "great settlement" is near to end the three-month war.[1][2]

The conflict, which erupted in late February 2026, led to the near-total closure of the Strait of Hormuz. This maritime chokepoint typically handles roughly 20% of the world's crude oil supply, and its blockade has choked off fuel shipments and sent global inflation soaring.[2][5]

Markets reacted violently to the prospect of the strait reopening. Brent crude fell more than 4% to around $86 a barrel—its lowest level since the war began—as traders priced in a return of Persian Gulf supply. Benchmark U.S. crude similarly shed over 4% to drop below $84 a barrel.[1][5]

The sudden de-escalation followed a tense week of tit-for-tat military strikes that threatened to shatter a fragile April ceasefire. Trump stated from the Oval Office that a memorandum of understanding (MOU) had been approved at the highest levels of Iranian leadership, predicting a signing ceremony in Europe as soon as this weekend.[2][4]

However, Tehran quickly tempered expectations. Foreign Ministry spokesperson Esmaeil Baghaei stated that while large parts of a text have been finalized, "nothing has been finalized" overall, emphasizing that Iran will not compromise on its core red lines.[3][6]

Iranian state media offered a glimpse into the ongoing negotiations, reporting that the draft 14-point agreement includes a 60-day ceasefire extension and the reopening of the Strait of Hormuz to pre-war shipping volumes within 30 days.[2][3]

Crucially for Tehran, the draft reportedly includes a stipulation that the U.S. will release $24 billion in frozen Iranian financial assets as soon as the deal takes effect, alongside temporary waivers allowing Iran to sell oil during the 60-day window.[2]

Market analysts remain cautious, noting that the U.S. administration has claimed a deal was imminent dozens of times in recent weeks without a breakthrough. Energy markets remain highly sensitive to any breakdown in talks, as physical shipments have yet to resume.[1][5]

Regional allies are watching the interim steps closely. Israeli Prime Minister Benjamin Netanyahu's office clarified that Israel is not a party to the MOU, but expressed appreciation for U.S. commitments that any final treaty would dismantle Iran's nuclear enrichment infrastructure and limit missile production.[2][7]

The economic stakes of the weekend's diplomacy are massive. The European Central Bank recently raised interest rates to combat inflation driven by the energy shock, and a sustained reopening of Hormuz is viewed by economists as critical to preventing a broader global recession.[5]