Oil Slides as US Touts Progress on Deal Toward Reopening Hormuz
(Bloomberg) -- West Texas Intermediate crude briefly fell below $90 a barrel for the first time in almost three weeks amid signs the US and Iran were progressing toward an agreement to reopen the Strait of Hormuz.
US President Donald Trump said Monday that negotiations with Iran over an interim deal to extend their ceasefire and reopen Hormuz were “proceeding nicely.” Trump’s comments, made in a Truth Social post, added to signals that the US and Iran are nearing an agreement. Pakistan’s military chief, Asim Munir, the main interlocutor between the warring sides, told China an agreement is “close to being reached.”
Global energy markets have been upended by the crisis, which began in February when the US and Israel attacked Iran. The conflict spread rapidly across the Persian Gulf region, forcing producers to shut in millions of barrels of daily crude supplies. Hormuz, which links the region to global markets, has been subject to a double blockade by both Tehran and Washington.
There is “a presumption that the Strait of Hormuz is going to be opened in the not too distant future and I think the market is betting that the supply demand situation rebalances and things are going to normalize,” Bart Melek, global head of commodity strategy at TD Securities.
It remains unclear how key differences, including the fate of the Islamic Republic’s nuclear program, will be addressed. Iran’s Tasnim news agency said the draft agreement could still collapse because the US was obstructing some key clauses, including a demand that its assets be unfrozen.
“A consensus was reached on many of the topics discussed, but no one can claim that the signing of an agreement is imminent,” Iran’s Foreign Ministry Spokesman Esmail Baghaei told reporters on Monday.
“The two sides may be closer on a ceasefire and Strait of Hormuz reopening framework, but still far apart on the harder issues,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore, citing sanctions and the nuclear program. “Oil has priced in relief, but not a durable resolution.”
Trading in crude futures was thinner than usual on Monday, with public holidays in the US and the UK. The US break for Memorial Day traditionally marks the start of the summer travel season, a period when demand for gasoline, diesel and jet fuel can be expected to rise.
The US and Iran have developed a memorandum that would extend the ceasefire by 60 days as the two sides seek a permanent deal, the Washington Post reported, citing a senior administration official. If agreed, the strait would be de-mined and reopened in the meantime, the newspaper said.
A full reopening of Hormuz, which in peacetime typically handled around a fifth of the world’s oil and liquefied natural gas, would be a relief for energy importers across Asia, including China, Japan and South Korea.
Transits have been running at a fraction of their pre-war pace, although a few vessels have made it through. Among them, a supertanker hauling Iraqi crude to China left the Persian Gulf and crossed the US blockade, ship-tracking data show. In addition, three liquefied natural gas tankers appear to have exited.
Iran said it is seeking to collect a shipping fee for services and environmental protection in the Strait of Hormuz, pushing back on describing it as a toll, the Iranian foreign ministry spokesman said. It’s unclear if the US would accept that.
The Islamic Republic claimed that 33 vessels, including oil tankers and container ships, had passed through the strait after obtaining permission from the Islamic Revolutionary Guard Corps Navy, Tasnim reported on Sunday, citing the force. The Trump administration has said that any toll system is unacceptable.
Trump has been facing growing domestic political pressure to end the conflict, particularly ahead of the November midterm elections that will determine control of Congress. The war has boosted the cost of fuels, with average US gasoline prices hitting the highest since 2022.
Elsewhere, Russia and Ukraine struck each other’s energy infrastructure. Ukraine hit the Sheskharis oil terminal, the largest on Russia’s Black Sea coast; a storage facility; and a major petrochemicals plant. State energy company Naftogaz said Russia targeted oil-and-gas facilities in the east.
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