There is now some light at the end of the tunnel
In the long human struggle over energy and geopolitical order, Monday brought a rare moment of cautious relief: oil markets fell sharply as word spread that the United States and Iran had moved close to a peace agreement that could reopen the Strait of Hormuz, sealed since February's conflict began. Brent crude dropped 5.5 percent and US crude fell 5.8 percent, as investors in Asia and beyond priced in the possibility that one-fifth of the world's energy flows might soon move freely again. Yet the distance between a largely negotiated deal and a finalized one remains a space where history has often stalled, and analysts remind us that even peace, once achieved, cannot instantly undo the damage war leaves behind.
- Oil markets jolted sharply downward Monday as reports of a near-complete US-Iran peace deal sent Brent crude to $97.90 and US crude to $90.99 — their steepest single-day drops in months.
- The Strait of Hormuz, closed since February and the flashpoint of months of regional conflict involving Iran, Israel, Saudi Arabia, and the UAE, sits at the center of every calculation traders are making.
- Trump declared the deal 'largely negotiated' on Saturday, then reversed tone by Sunday, urging both sides to slow down and 'get it right' — a whiplash that exposed just how unsettled the path forward remains.
- Iran's foreign ministry acknowledged converging positions but pushed back on American optimism, warning that convergence is not agreement and criticizing what it called contradictory US statements.
- Asian markets surged on the news — Japan's Nikkei crossed 65,000 for the first time — but energy analysts caution that oil will stay tight through 2027 as infrastructure repairs and reserve rebuilding take years, not weeks.
Oil prices fell sharply on Monday as financial markets responded to reports that the United States and Iran were close to finalizing a peace agreement. Brent crude dropped 5.5 percent to $97.90 a barrel and US crude slid 5.8 percent to $90.99, driven by hopes that the deal could reopen the Strait of Hormuz — the narrow waterway through which roughly one-fifth of the world's oil and gas normally flows, effectively closed since the conflict began in late February.
President Trump announced over the weekend that negotiations had been "largely negotiated," citing plans to reopen the strait and describing calls with leaders across the Gulf region as part of a broader peace framework. He also said a conversation with Israeli Prime Minister Netanyahu "went very well." But by Sunday his tone had shifted, urging both sides on Truth Social to take their time and avoid mistakes — a note of caution that tempered the earlier optimism.
Iran's foreign ministry offered a more measured read, acknowledging that positions had been converging but warning that convergence was not the same as agreement, and criticizing what it called contradictory American statements. The gap between Trump's confidence and Tehran's skepticism highlighted how delicate the final stretch of negotiations remains.
The market response was sharpest in Asia, where energy-dependent economies have felt the conflict most acutely. Japan's Nikkei 225 rose above 65,000 for the first time, gaining nearly 3 percent, while South Korea also benefited from the improved sentiment. Western markets were closed for public holidays, limiting the full global picture.
Even with Monday's decline, oil prices remain far above pre-war levels — Brent was near $70 a barrel before the conflict began. Analysts warn that even if the deal is finalized, restoring full flows through the strait, repairing damaged infrastructure, and replenishing depleted reserves will take years. Markets may have found some light at the end of the tunnel, but the tunnel itself remains long.
The price of oil dropped sharply on Monday morning as financial markets reacted to news that a peace agreement between the United States and Iran was nearing completion. Brent crude, the global benchmark, fell 5.5 percent to $97.90 a barrel, while US-traded crude slid 5.8 percent to $90.99. The decline reflected investor optimism that a deal could soon reopen the Strait of Hormuz, the narrow waterway between the Persian Gulf and the Gulf of Oman through which roughly one-fifth of the world's oil and liquefied natural gas normally flows.
President Trump announced on Saturday that negotiations with Tehran had been "largely negotiated," though he withheld specifics. He said the agreement would include reopening the strait, a detail he emphasized without elaboration. The president also reported having calls with leaders of Saudi Arabia, the United Arab Emirates, Qatar, and others about what he described as a "Memorandum of Understanding pertaining to PEACE." A separate conversation with Israeli Prime Minister Benjamin Netanyahu, he said, "went very well." Yet by Sunday, Trump's tone shifted. On Truth Social, he cautioned both sides to "take their time and get it right," warning that "there can be no mistakes."
The strait has been effectively closed since the conflict began on February 28. Iran had threatened to attack ships attempting passage in retaliation for US and Israeli military actions. Tehran also launched attacks on Israel and US-allied states in the region, including Saudi Arabia, Bahrain, and the United Arab Emirates. A ceasefire was agreed in early April, after which Washington and Tehran began discussing a longer-term settlement.
The market reaction was most pronounced in Asia, where energy-dependent economies felt the pinch most acutely. Japan's Nikkei 225 stock index rose above 65,000 for the first time, gaining 2.9 percent on the prospect of restored energy flows. South Korea, similarly reliant on Gulf energy supplies, also benefited from the optimistic sentiment. UK and US markets remained closed on Monday for public holidays, limiting the full scope of the global response.
Iranian foreign ministry spokesman Esmaeil Baqaei offered a more cautious assessment, telling state television that American and Iranian positions had been converging over the previous week but cautioned that convergence did not guarantee agreement on core issues. He also criticized the United States for making "contradictory statements." This tension between Trump's optimism and Iranian skepticism underscored the fragility of the negotiations.
Despite the sharp decline, oil prices remain substantially elevated compared to pre-conflict levels. Before the war began, Brent crude was trading around $70 a barrel. The current price, even after Monday's drop, reflects the lingering uncertainty and damage inflicted by months of conflict. Saul Kavonic, head of energy research at MST Financial, noted that while the deal offers "some light at the end of the tunnel" and near-term price relief, the path to normalization will be long. Even in the most optimistic scenario, he warned, oil markets will remain tight through 2027. Restoring full flows through the strait, repairing damaged facilities, and rebuilding global oil reserves depleted during the war will all take considerable time. The agreement, if finalized, represents a turning point—but not an immediate return to stability.
Citas Notables
An agreement has been largely negotiated, subject to finalization between the United States of America, the Islamic Republic of Iran, and the various other Countries.— President Trump, Saturday
Both sides must take their time and get it right. There can be no mistakes.— President Trump, Sunday
La Conversación del Hearth Otra perspectiva de la historia
Why does the Strait of Hormuz matter so much that its potential reopening moves global markets?
Because one-fifth of the world's oil and liquefied gas passes through it. When it closes, there's no easy alternative. Prices spike because supply suddenly becomes scarce and uncertain.
So Trump saying the deal is "largely negotiated" is enough to move prices down 5.5 percent?
Yes, because markets trade on expectation. If investors believe the strait will reopen soon, they price in future supply. But notice Trump also said not to rush—that's a signal the deal isn't done, which is why prices didn't fall even further.
Japan's stock market jumped 2.9 percent. Is that just about oil prices?
Partly. But Japan imports most of its energy from the Gulf. A closed strait means higher costs, supply uncertainty, economic drag. An open strait means stability and lower energy bills. That affects everything.
The Iranian spokesman said positions are converging but warned about contradictory American statements. What does that mean?
It means Iran sees the US saying one thing publicly and another in negotiations. Trust is fragile. Even if both sides want a deal, the details matter enormously—what happens to sanctions, what guarantees exist, whether the nuclear question is really settled.
But oil is still much higher than before the war, even after this drop.
Right. Because even if a deal is signed tomorrow, the physical work takes months. Damaged facilities need repair. Tankers need to resume routes. Global reserves are depleted. The market is pricing in a long, slow recovery, not an instant return to normal.