Oil Slides Below $100 as U.S.-Iran Talks Signal Progress on Hormuz
Global equities rally, bond yields drop as traders price in potential end to supply disruption
Brent crude fell more than 5% to $97.94 per barrel as President Trump indicated negotiations to reopen the Strait of Hormuz are advancing. Global equities surge
Oil Retreats on Diplomacy Headlines
Crude oil gave back ground Sunday evening after President Trump said U.S.-Iran negotiations were proceeding in an "orderly and constructive manner." Brent futures dropped to $97.94 per barrel as of early Monday GMT, falling below the $100 mark for the first time since earlier this month. West Texas Intermediate slid to roughly $91.65, a decline of about 5% from Friday's close.
The retreat follows months of elevated prices driven by Iran's de facto blockade of the Strait of Hormuz, which began in early March after U.S. and Israeli airstrikes killed Iran's top leadership. Before the conflict, roughly 20% of global oil supply transited the strait. By mid-May, the disruption was blocking about 14 million barrels per day, according to the International Energy Agency.
Traders are discounting the possibility that an agreement to reopen Hormuz could be announced soon. But the market has seen this movie before. Oil lost more than 8% last week after Trump called off imminent airstrikes, only for tensions to flare again. The current move is pricing in hope, not a signed document.
Risk Assets Rally, Bonds Catch a Bid
With oil retreating and geopolitical risk premiums compressing, global equities moved higher. Japan's Nikkei 225 surged more than 3% in early Monday trading, hitting an all-time high. European futures pointed to gains at the open, and U.S. equity futures were bid overnight.
Bond markets reflected the shift in sentiment. Global yields dropped as investors unwound inflation hedges tied to energy costs, while the U.S. dollar slipped against a basket of major currencies. The move in bonds is particularly notable: for months, yields had been sticky due to persistent inflation fears rooted in the oil shock. A sustained pullback in crude could finally give central banks room to breathe.
The macro setup here is straightforward. If oil normalizes, inflation expectations compress, and the Fed has cover to stay on hold rather than hike further. That's bullish for duration and risk assets alike.
Supply Reality Check
Even if an agreement materializes, the energy market won't snap back overnight. Global crude inventories are depleting at a record pace, with the U.S. withdrawing nearly 10 million barrels from the Strategic Petroleum Reserve last week alone, the largest drawdown on record. Commercial inventories are expected to fall below their lowest seasonal levels in five years by late June.
Europe is feeling the pain acutely. Eurozone economic activity shrank at its sharpest rate in more than two and a half years in May as energy-driven cost increases hammered demand and forced firms to accelerate layoffs. A deal that reopens Hormuz would ease the immediate supply crunch, but the inventory rebuild will take months, and pump prices likely remain elevated well into Q3.
For traders watching energy names and macro-sensitive sectors, the read is nuanced. A headline-driven rally in risk assets is one thing. A durable repricing of energy costs is another. Until shipping actually resumes through the strait, the market is trading optionality on diplomacy.
For informational purposes only. Not investment advice. Published Monday, May 25, 2026.