Oil Plunges 5% as Trump Signals Iran Deal Progress
1h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
crude-oilbrent
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Oil prices declined sharply on May 24, 2026, extending weekly losses after President Donald Trump stated that talks with Iran were proceeding constructively. Crude benchmarks dropped approximately 5% in the session following the comments, which indicated a largely negotiated agreement concerning the Strait of Hormuz was imminent. The remarks were reported by CNBC on May 24, 2026, and catalyzed a selloff that erased over a month of gains for the commodity.
The Strait of Hormuz is the world's most critical oil transit chokepoint, handling roughly 21 million barrels per day. That volume represents about one-fifth of global oil supply and one-third of all seaborne crude shipments. A sustained negotiation to de-escalate tensions and ensure open transit directly addresses a perennial risk premium embedded in oil prices. The last comparable de-escalation event occurred in July 2025 when a temporary truce led to a 4.1% single-day price drop.
Current markets are characterized by high volatility, with the CBOE Crude Oil Volatility Index (OVX) trading near 45 before the announcement. Prices had been consolidating after a run-up driven by OPEC+ supply discipline and resilient global demand. The Trump administration's shift towards a negotiated settlement on the Strait represents a significant pivot, as prior policy had emphasized sanctions and naval presence to deter Iranian actions against commercial shipping.
The immediate catalyst was President Trump's characterization of the talks as proceeding in a 'constructive manner.' This language, coupled with his statement that an agreement was 'largely negotiated,' signals a high probability of a formal announcement. Markets interpreted this as reducing the likelihood of a supply disruption from the Persian Gulf, a tail risk that has supported prices for years.
Global crude benchmarks recorded sharp declines on May 24. Front-month Brent futures fell $4.86, or 5.1%, to settle at $90.42 per barrel. West Texas Intermediate (WTI) crude futures dropped $4.71, or 5.3%, to close at $84.15 per barrel. The price drop represented the largest single-day percentage decline for both benchmarks since February 12, 2026, when prices fell 5.8% on a surprise inventory build.
| Metric | Pre-Announcement (May 23 Close) | Post-Announcement (May 24 Close) | Change |
|---|---|---|---|
| Brent Crude | $95.28/barrel | $90.42/barrel | -5.1% |
| WTI Crude | $88.86/barrel | $84.15/barrel | -5.3% |
| USO ETF | $92.14/share | $87.23/share | -5.3% |
| XLE ETF | $101.50/share | $98.45/share | -3.0% |
The energy sector severely underperformed the broader market. While the S&P 500 Index closed flat, the Energy Select Sector SPDR Fund (XLE) fell 3.0%. The United States Oil Fund (USO), which tracks near-term WTI futures, declined 5.3%, mirroring the spot crude move. The selloff extended to related commodities, with gasoline futures (RB) dropping 4.2% and heating oil (HO) falling 3.8%.
The price action pressures profitability across the energy complex. Integrated majors like ExxonMobil (XOM) and Chevron (CVX) saw intraday declines of 2.5% and 2.8%, respectively. Pure-play exploration and production companies, which have higher operational use to oil prices, experienced steeper losses. Shares of Occidental Petroleum (OXY) dropped 4.1%, while ConocoPhillips (COP) fell 3.7%.
Second-order beneficiaries include transportation and industrial sectors that are major consumers of fuel. Airlines such as Delta Air Lines (DAL) and American Airlines (AAL) gained 1.5% and 1.8% on the session. Shipping companies and freight haulers also traded higher on the prospect of lower input costs. The counter-argument is that a durable deal remains uncertain, and any breakdown in talks could reverse the price move rapidly.
Market positioning data from the Commodity Futures Trading Commission showed speculative net-long positions in WTI futures were near a four-month high prior to the drop. This suggests a crowded long trade was vulnerable to a geopolitical catalyst. Immediate flow data indicates heavy selling in oil futures and related ETFs, with some rotation into beaten-down technology and consumer discretionary stocks.
Markets will watch for the formal announcement of the agreement, which President Trump indicated would come 'soon.' The exact terms regarding Strait of Hormuz transit guarantees and any corresponding sanction relief will be critical for pricing a new equilibrium. The next scheduled OPEC+ meeting on June 4, 2026, becomes more significant, as producers may reassess output quotas in light of reduced geopolitical risk.
Technical levels for Brent crude to monitor include the 50-day moving average near $88.50 and the psychological $90 support level. A breach below $88 could target the 200-day moving average around $85.20. The weekly U.S. Energy Information Administration inventory report on May 28 will provide fresh data on supply-demand balance.
Continued progress hinges on the verification of the agreement by both U.S. and Iranian officials. Any hardening of rhetoric from either side would reintroduce the risk premium. The state of U.S. Strategic Petroleum Reserve releases and the pace of Chinese strategic stockpiling are additional variables that will influence price direction.
Retail gasoline prices typically follow crude oil price movements with a lag of one to two weeks. A 5% decline in crude oil translates to a roughly 4-4.5% reduction in gasoline refinery input costs, excluding taxes and distribution margins. For a U.S. national average price of $3.80 per gallon, this could imply a potential future decline of 15 to 17 cents per gallon, barring other supply disruptions.
Historical incidents causing supply fears have led to immediate price spikes. In June 2019, attacks on two oil tankers near the Strait pushed Brent crude prices up 2.2% in a single day. A more severe event in September 2019, following attacks on Saudi Aramco facilities, caused Brent to surge 14.6% in its largest-ever intraday gain. De-escalation events, like the 2015 Iran nuclear deal announcement, have produced symmetrical declines of 4-6%.
Exploration and production (E&P) companies exhibit the highest sensitivity, or beta, to oil price moves. Their operating margins are directly tied to the realized price of crude. Midstream pipeline and storage companies, like Enterprise Products Partners (EPD), have lower sensitivity as their revenue is often fee-based. Refiners can see mixed effects, as lower input costs help margins but falling gasoline prices can pressure crack spreads.
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