Oil prices fell sharply Wednesday as President Trump announced that negotiations with Iran are in the “final stages.” This development has bolstered hopes that the critical Strait of Hormuz could soon reopen, potentially easing supply concerns.
West Texas Intermediate futures dropped over 6%, settling at $97.74 per barrel by 12:58 p.m. ET, while Brent futures also saw a nearly 6% decrease, landing at $104.62 per barrel.
During a press briefing, Trump shared that his administration is close to a deal. Earlier this week, he had indicated that military actions against Iran were called off to allow for more diplomatic efforts, following requests from Gulf Arab allies.
The market has been in turmoil recently due to the ongoing negotiation dynamics between the U.S. and Iran. Trump has remained positive about a swift resolution and an end to hostilities, despite recurring escalations and disruptions in shipping.
BREAKING: US oil prices fall over -7% to $97/barrel after President Trump says the US is in “final stages” of talks with Iran. pic.twitter.com/9i8FDFcUCb
— The Kobeissi Letter (@KobeissiLetter) May 20, 2026
Both Iran and the U.S. find themselves in a tense standoff, with Tehran blocking access to the Strait of Hormuz, while the U.S. has implemented sanctions against Iranian ports. As one of the world’s key shipping routes for oil and gas, even minor disruptions can significantly impact global prices.
Investors are keenly watching for any signs that the chokepoint might reopen. However, analysts caution that traders may be prematurely optimistic about a quick resolution, as underlying factors continue to present risks.
Citibank highlighted concerns regarding the market’s undervaluation of the potential for extended disruptions to oil supplies through Hormuz, predicting Brent could rise to $120 per barrel shortly.
According to Citi analysts, the likelihood of Iranian disruptions appears to be growing. In a worst-case scenario, where Hormuz remains blockaded until the year’s end, oil prices could soar to nearly $200 per barrel, as noted by an analysis from Wood Mackenzie.
On a more optimistic note, if a peace agreement is reached quickly, with Hormuz reopening by June, oil prices might plummet to around $80 per barrel by the end of 2026, according to Wood Mackenzie’s projections.
Currently, traders are hopeful that Trump’s declaration about being in the “final stages” signifies a resolution to the ongoing crisis. Ultimately, the success of this optimism will depend on upcoming developments both in Hormuz and at the negotiating table.
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