Oil Drops 6% as Trump Claims Iran Deal Close, Ships Move Through Hormuz

Brent crude fell as much as 6.5% to $104.87 a barrel on Wednesday after President Donald Trump said the United States was in the "final stages" of negotiations with Iran, and Iranian state media reported the first significant ship movements through the Strait of Hormuz since the conflict began in late February. WTI dropped 6.1% to $98.13 in the same session. The moves erased Tuesday's modest gains—Brent had closed at $110.95 and WTI at $103.89, both up roughly 1%—and extended a selloff that began after a White House pool report cited by Bloomberg quoted Trump's comments. Two Chinese-flagged supertankers and a South Korean VLCC carrying oil exited the strait Wednesday, Reuters reported, citing shipping data. Iran's Islamic Republic Broadcasting said vessels could pass "only with the coordination of Iran," stopping well short of a formal reopening. Iran also warned of war extension "outside the Middle East region" if attacks were repeated, while Bloomberg reported a 14-point memorandum of understanding was under discussion. Tehran said it was "evaluating" the proposal and would accept only a "fair" deal. Trump warned Tuesday that if talks collapsed, "the bombing starts... at a much higher level." The price action reflects just how far markets have swung since the U.S.-Israeli military campaign, which began February 28 under the name Operation Epic Fury. Brent peaked near $120 in March, crashed to around $63 on earlier ceasefire speculation, then climbed back above $110 before this week's slide. The conflict has killed more than 2,300 Iranian civilians and 13 U.S. service members. Physical supply tightness has not disappeared. The Brent prompt-month premium over six-month contracts stood near $20 a barrel as of Monday—down from a $35 peak but still signalling a market short of crude. U.S. inventory data published Wednesday showed a 4-million-barrel build in the latest reporting week, with exports running near record levels as buyers scrambled to replace Hormuz barrels. The strait normally handles about 20% of global oil flows; Wednesday's 26 transits compare with a pre-war average of 140 vessels per day. U.S. retail gasoline prices topped $4.50 per gallon for the first time since July 2022. RBOB futures eased slightly on Tuesday to $3.56 a gallon, while heating oil rose 1.49% to $4.02. Analysts are divided on where oil goes from here. Wood Mackenzie estimates Brent could reach $200 if the strait remains largely closed through year-end; Citi sees near-term prices around $120. A sustained ceasefire could pull Brent into the mid-$90s if supply flows resume, though full restoration to pre-war volumes is expected to take months given infrastructure damage. The next signal is ship transit volumes. If flows through Hormuz build materially over the coming days, the backwardation structure holding near $20 will compress quickly. Trump's planned meeting with Chinese President Xi Jinping later this month is also a variable: China is Iran's largest oil buyer and its posture on sanctions enforcement will shape any deal's durability. A breakdown in talks would most likely send prices back toward the March highs.