Oil Slides 5% as Hopes for Iran Deal Ease Energy Fears

Oil prices tumbled more than 5 percent on Monday as traders reacted to comments from President Donald Trump suggesting a deal with Iran could reopen the Strait of Hormuz. Brent crude fell to $97.90 a barrel while US-traded crude dropped to $90.93, marking the sharpest one-day decline in weeks. Asian stock indexes advanced, with Japan’s Nikkei surging more than 3 percent, though several major markets remained closed for holidays.

Trump posted on social media Saturday that a memorandum of understanding had been “largely negotiated” between the United States, Iran and several Gulf states. He said the agreement would address the nearly three-month conflict that began February 28 and had effectively closed the Strait of Hormuz, through which roughly a fifth of global oil and liquefied natural gas shipments normally pass. A day later the president told negotiators “not to rush into a deal,” and Secretary of State Marco Rubio said in Delhi that talks remained “a work in progress.”

Iranian officials struck a similarly measured tone. Foreign ministry spokesman Esmail Baqai acknowledged that “a large portion of the issues” had been settled but added that no one could claim a signing was imminent. Regional diplomats told the Associated Press that any final accord would also require Iran to relinquish its stockpile of highly enriched uranium, a demand Tehran has resisted in past negotiations.

The conflicting signals left analysts cautious about how quickly the strait might reopen. Former CIA director David Petraeus told CNBC that Iran appeared to be “in the process of blinking” and would likely have to accept an unconditional reopening without tolls or future threats of closure. He noted that Iranian naval and missile capabilities had been significantly degraded by prior US and Israeli strikes, yet warned that any deal granting Tehran residual influence over the waterway could leave it strategically stronger.

Market moves extended beyond energy. Gold rose above $4,550 an ounce as the dollar eased and inflation concerns tied to high oil prices began to recede. Silver and platinum also climbed. Traders appeared to price in a lower likelihood of near-term interest-rate hikes by the Federal Reserve, whose new chair Kevin Warsh took office last week amid elevated gasoline costs linked to the Hormuz disruption.

European and US equity futures pointed higher, though liquidity was thin because of the holiday schedule. Analysts at Pepperstone and KCM Trade said investors were focusing more on the generally positive tone of recent statements than on any specific timeline. Still, they cautioned that unresolved issues, including Iran’s uranium stockpile and control over shipping lanes, could keep volatility elevated until concrete details emerge.

The war’s economic effects have already been substantial. Three months of elevated energy prices have contributed to hotter inflation readings and weaker consumer sentiment in several countries, prompting markets to reassess the path of monetary policy. A durable reopening of the strait would reverse some of those pressures, but diplomats and officials on both sides continue to describe final terms as incomplete.