Oil tumbles nearly 7% as US and Iran move closer to Hormuz peace deal

Oil prices plunged on Monday as markets priced in a higher probability that the United States and Iran are moving closer to a peace agreement that could reopen the Strait of Hormuz, a key shipping chokepoint for global energy flows.

The move followed comments and reporting that suggested talks — including visits by senior Iranian envoys to Doha and public remarks by US officials — were making progress. Intraday moves showed US West Texas Intermediate (WTI) contracts down roughly $4.8–$5.0 to the low $90s, while Brent slid into the high $90s to around $98–100 a barrel; reported declines varied across timestamps from about 5% up to nearly 7%.

The drop in crude weighed on energy equities and removed some near-term inflationary pressure from fuel costs, while supporting risk assets more broadly as geopolitical risk premia eased. Fixed-income and currency markets reacted as participants adjusted positions for a lower oil price environment, though volatility remained elevated given the fluid diplomatic situation.

Market commentators note that any formal deal that secures freedom of navigation through the Strait of Hormuz would materially alter the supply-risk calculus for global oil markets. However, most analysts warn that physical restoration of flows, insurance and shipping normalization could take weeks to months even after a political agreement, meaning the market may only gradually remove the full premium that built during the disruption.

Analysts expect news flow from Doha, ship-tracking data showing increased transits through the strait, and official confirmations of an agreement to be the main drivers in the near term. Traders are likely to remain sensitive to headline risk and could see further sharp moves if talks falter or accelerate; risk managers advise monitoring both diplomatic developments and physical market indicators before repositioning longer-term exposure.