Oil Plunges on Reports that US, Iran May Be Close to Deal to End the War

  • Oil prices plunged on Wednesday morning, May 6, 2026, on news that the US and Iran may be within striking distance of a deal to end the war in Iran that has wracked the global energy market. Futures on Brent crude, the international benchmark, fell by as much as 11% to briefly dip below $100 per barrel before regaining the level, after only a week ago crossing $126 per barrel.
  • The precipitous drop in oil prices comes after reports that Washington and Tehran may be close to reaching an agreement to end the war, now in its third month, and reopen the Strait of Hormuz. Key provisions of the deal in progress include a moratorium on Tehran’s nuclear enrichment program, US agreements to lift sanctions on Iran and release billions of dollars in frozen funds, and commitments from both sides to reopen the Strait of Hormuz and allow commercial traffic to restart.
  • Iran is expected to send a response to the US proposal through mediator nation Pakistan within the next two days, Bloomberg reported. Ebrahim Rezaei, the spokesperson for Iran’s National Security and Foreign Policy Commission, said Wednesday that the terms reported by Axios represent an American “wish list,” and that Tehran is prepared to respond militarily if its own demands aren’t met.
  • The news comes after President Trump said Tuesday night that he was ending “Project Freedom,” the White House’s public operation to guide vessels out of the Persian Gulf through Omani waters, after announcing the plan only two days prior on Sunday, May 3, 2026.
  • If both sides agreed on the preliminary deal, that would start the clock on 30 days of detailed negotiations to reach a full agreement. The full agreement would include the U.S. lifting sanctions and releasing frozen Iranian funds, Iran and the United States lifting competing blockades on the Strait of Hormuz, and curbs on Iran's nuclear programme, to seek a pause or moratorium on Iranian enrichment of uranium.
  • That said, even if the US were to reach a deal with Iran and both sides were to agree to a reopening of the Strait of Hormuz, it is likely to still take months for the global energy system to normalise. The bill for repairs to critical energy infrastructure has surpassed $50Bn, according to Rystad Energy, and shipowners will be loath to face the risk of re-escalatory military action by Iran.

(Sources: Reuters & Yahoo Finance)