Oil prices dipped slightly early Monday as diplomatic signals between Washington and Tehran raised hopes of a resolution to the conflict that has choked one of the world’s most critical energy arteries. West Texas Intermediate crude futures fell more than 6 percent to $90.68, while Brent crude, the global benchmark, dropped to $97.22, reflecting cautious optimism that a deal could restore normal shipping through the Strait of Hormuz.
The conflict traces back to February 28, when U.S. and Israeli forces launched strikes on Iranian military targets, triggering Iran’s closure of the Strait — a narrow passage through which nearly a fifth of the world’s oil supply flows. The move sent gas prices surging from under $3 a gallon almost overnight. Since then, the U.S. Navy has blockaded Iranian ports, and Central Command reported Saturday it has redirected 100 ships in the strait. Under normal conditions, roughly 60 vessels transit the waterway daily; in the past 24 hours, just two have passed through, according to hormuzstraitmonitor.com.
A Deal Taking Shape — But Sticking Points Remain
A fragile ceasefire has been in place since April 8, but the path to a lasting agreement has been rocky. According to Axios, the deal now being negotiated would establish a 60-day ceasefire extension, reopen the strait, allow Iran to freely sell oil, and open talks on curbing Iran’s nuclear program. CBS News reported that in exchange for lifting the naval blockade, Iran would dispose of its highly enriched uranium — a key U.S. demand throughout the conflict.
Donald Trump said Saturday that an agreement was “largely negotiated” after holding calls with leaders across the Gulf region, including Saudi Arabia, the UAE, Qatar, and Israeli Prime Minister Benjamin Netanyahu. On Monday, he maintained that any outcome “will either be a great or meaningful one, or there will be no deal.” Iran’s state-run Fars News Agency, however, pushed back on Trump’s framing, stating that his characterization of the deal was “inconsistent with reality” and insisting that Tehran would retain management of the waterway.
Pump Prices Stay Elevated Despite Diplomatic Progress
For most Americans, the conflict has registered most directly at the gas station. The national average for regular gasoline stood at more than $4.50 a gallon on Monday — a price level that has persisted since the early weeks of the war, despite a slight softening on Monday.
Patrick De Haan, head of petroleum analysis at GasBuddy, made clear that price relief won’t come from negotiations alone, writing Sunday that “until we see an agreement signed & a significant amount of ships transit through the Strait” the national average “will likely remain well above” $4 per gallon. “Only once we start seeing confidence and ships move will prices plummet,” he added.
Record Memorial Day Travel, Despite the Squeeze
The elevated prices don’t appear to have significantly deterred holiday travel. AAA projected that more than 39 million Americans would travel by car for Memorial Day weekend — a new record. But the organization noted a softening at the margins. Memorial Day travel is still reaching record levels, but with the smallest year-over-year increase in more than a decade,” said Tiffany Wright, a spokesperson for AAA’s The Auto Club Group. “Higher fuel prices and persistent inflation may cause some travelers to shorten trips, delay plans, or stay closer to home.”
Markets are watching closely, and analysts say the next major price movement will depend less on what is said in Washington or Tehran — and more on how many tankers actually start moving through the strait.
