Crude oil prices continued to drift lower on Monday, 25 May, as hopes of a potential peace deal between the US and Iran strengthened, raising expectations of a reopening of the Strait of Hormuz.
Extending their decline, Brent crude futures crashed another 7.2% in trade to $95.95 per barrel, marking the lowest level since 23 April, while WTI crude futures also fell nearly 7% to the day’s low of $89.44 per barrel.
The decline in crude prices accelerated after US Secretary of State Marco Rubio said that the US would give diplomacy every opportunity to succeed before considering dealing with Iran “another way.”
Trump says talks are progressing, but no rush for a deal
Over the weekend, US President Donald Trump said, “negotiations were proceeding in an orderly and constructive manner,” although he added that the US would not rush into a deal and Washington’s blockade of the strait would remain in place until an agreement is finalized.
On Monday, Trump reiterated in a social media post that talks were “proceeding nicely,” but warned of fresh attacks if negotiations failed. “It will only be a great deal for all, or no deal at all,” he wrote on Truth Social.
Meanwhile, Iran’s foreign ministry spokesperson Esmaeil Baghaei reportedly said several conclusions had been reached on multiple issues, though that did not necessarily mean both sides were close to a final agreement.
Key disagreements continue to cloud outlook
Although both countries once again signalled willingness to end the conflict, it remains unclear how major disagreements, including the future of Iran’s nuclear programme and control over the Strait of Hormuz, will be resolved.
Iran’s Tasnim news agency reported that the draft agreement could still collapse because the US was objecting to several key clauses, including Tehran’s demand for the unfreezing of its assets.
This is also not the first time the US has indicated that tensions could ease soon. Earlier too, Washington had suggested the conflict may de-escalate, only to later warn that attacks would intensify if Iran refused to abandon its nuclear ambitions. The repeated swings between escalation fears and de-escalation hopes have kept crude oil prices highly volatile.
Strait of Hormuz reopening seen as major relief for Asian economies
Since the escalation of the conflict in late February, the Strait of Hormuz has effectively remained shut. A full reopening of the waterway would provide significant relief to major Asian economies and could push oil prices substantially lower, considering the route carries roughly one-fifth of global oil and LNG shipments.
The closure of the key maritime route forced several major oil-producing nations in West Asia to halt output, adding further pressure on crude prices, with Brent at one point nearing $120 per barrel.
Meanwhile, Iran 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, according to Tasnim on Sunday. The Trump administration, however, has maintained that any toll-based system for passage through the strait would be unacceptable.
President Trump has also 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 sharply increased fuel costs, with average US gasoline prices climbing to their highest levels since 2022.
(With inputs from Bloomberg)
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