LONDON, May 27, 2026, 19:01 (BST)
Oil prices slid about 4% Wednesday as Iranian state TV reported it had seen a draft U.S.-Iran deal aimed at ending fighting and reopening the Strait of Hormuz. Global benchmark Brent dropped $3.94 to $95.59 a barrel at 12:36 GMT. U.S. WTI crude was down $3.97 at $88.91.
Hormuz is key for global shipping. The International Energy Agency reports around 20 million barrels a day of crude and oil products crossed the strait in 2025, nearly a quarter of the world’s seaborne oil trade. LNG shipments from Qatar and the United Arab Emirates also rely on the same route.
Oil prices broke as traders focused more on fear than on actual supply. The IEA said this month that lower traffic through Hormuz had pushed total Gulf supply losses past 1 billion barrels, with over 14 million barrels a day shut in.
Iranian state TV reported that a draft memorandum of understanding, described as a preliminary negotiating text, could bring shipping through Hormuz back to pre-war levels in a month. The outlet said the United States would lift its naval blockade of Iranian ships and pull its forces away from Iran, while Iran would run commercial ship traffic together with Oman. State TV said the draft is unofficial and not final.
Any agreement still looked remote. The White House dismissed the report as a “complete fabrication,” and President Donald Trump said the U.S. was “not satisfied” with negotiations. Iran’s Ali Bagheri Kani also said nothing was final until everything on the table was resolved. Reuters
Crude futures dropped after traders saw a peace deal as more likely, driving what Dennis Kissler, senior vice president of trading at BOK Financial, called “heavy selling pressure.” Losses erased all of Tuesday’s Brent rally that came on the back of new U.S. strikes in Iran. Reuters
Shipping signals were still mixed. On Wednesday, a COSCO products tanker moved through Hormuz, following two crude tankers the day before. But typical daily crossings held at about 11 vessels, well under the 125 to 140 a day before the war began on Feb. 28.
Security concerns remain. A tanker crew was safe after reporting an external explosion off Oman on Tuesday. Iran called recent U.S. strikes in Hormozgan province a breach of a fragile ceasefire. Washington described the strikes as defensive, hitting missile sites and boats laying mines.
IndiGo and Air India, which together hold about 90% of India’s domestic air market, are pulling back on capacity for June and July. Sources told Reuters IndiGo is slashing around 7% to 10% of its planned domestic flights, while Air India has cut 22%.
Fuel is up to 40% of airline costs. Air India has cut back some domestic flights, blaming the “sustained impact” of high fuel prices. The pullback suggests demand is getting hit, even if crude comes down. Reuters
Lorie Logan, who runs the Dallas Fed, spelled out the risk. She said if shipping through Hormuz doesn’t get back to normal soon, the world may have to cut oil and gas use more than before. “If the molecules aren’t available, the world can’t consume them,” Logan said. Reuters
Some producers keep outlets near the strait, but these can’t match regular flows. The U.S. Energy Information Administration says Saudi Arabia and the UAE run pipelines that avoid Hormuz. Still, most oil going through the strait doesn’t have a real back-up route.
Markets are now watching how quickly Hormuz can reopen, not just if it matters. A signed accord may cut the war premium in oil. Without a deal, crude, jet fuel and shipping insurance would stay at risk if violence breaks out again.
