President Donald Trump told on Monday that a settlement with Iran is within reach, and oil traders responded by selling first and reading the fine print later.
In a Truth Social post, Trump said negotiations with Iran are “proceeding nicely” and that the outcome will be “a Great Deal for all or, no Deal at all.” He added the alternative was a return to “the battlefront and shooting, but bigger and stronger than ever before.”
In the same post he called on Saudi Arabia, Qatar, Pakistan, Turkey, Egypt and Jordan to sign the Abraham Accords, and floated the idea of Iran eventually joining the same framework.
The oil market heard the word “deal” and moved.
West Texas Intermediate futures – as tracked by the United States Oil Fund (NYSE:USO) – dropped to roughly $91 a barrel, while Brent slipped below $98.
Analysts React To US-Iran ‘Likely’ Peace Deal
Robin Brooks, a senior fellow at the Brookings Institution, highlighted Monday that this is the closest the two sides have come to peace since the war started, and that a confirmed deal would send crude lower fast.
Brooks said he expects Brent to fall toward $85 in the coming days if an agreement holds, and that “all else follows” — markets would quickly return to pricing Federal Reserve rate cuts and the dollar would weaken.
That is the clean version of the bull case: a deal closes, the war premium drains, lower energy costs ease inflation, and the Fed gets room to cut.
Mohamed El-Erian, the chief economic advisor at Allianz, framed the same move with a caveat.
With oil down sharply on signals that an agreement is close, he noted that where crude goes next depends not only on whether the deal is finalized but on the details — specifically what they imply for the return of free navigation through the Strait of Hormuz.
Jeff Currie, the chief strategy officer of the energy pathways team at The Carlyle Group and Goldman Sachs Group Inc.’s former global head of commodities research, told investors to “sell the tweet, buy the molecule.”
The logic underneath the slogan matters more than the slogan.
The argument is that there have been several “deal” announcements during this conflict and, so far, none has actually closed.
Each headline compresses the risk premium in oil. None has yet delivered a tanker freely through the Strait of Hormuz.
“Buy the molecule” is the second half, and it is the part retail investors tend to miss. A barrel of oil that physically exists today — the molecule — is worth more than a barrel promised by a press release.
Currie’s case is that Iran’s negotiating position is the strongest it has been in 47 years, and that its leverage compounds with every day that passes while inventories draw down. The West’s leverage moves the other way. Time, in this reading, is on Tehran’s side.
The Strait Is The Story
Bloomberg energy columnist Javier Blas has made the point that the oil market keeps underpricing: a ceasefire announcement and a reopened strait are not the same event.
In his latest post, Blas indicated the status of the waterway has already changed. What was a free passage before the war is now, at best, a controlled one.
The legal core of the problem is technical but decisive.
A genuinely free strait would operate under the United Nations Convention on the Law of the Sea, which guarantees transit passage without tolls or fees.
Blas noted that neither Iran nor the United States has ratified that treaty — even if both have broadly observed parts of it.
That leaves both sides free to rearrange the terms of passage, and a strait governed by negotiated tolls rather than treaty law is a structurally more expensive strait.
This is the transmission chain the headline price is skipping. A signed ceasefire ends the shooting. It does not automatically restore free navigation.
If the strait reopens as a controlled, toll-bearing waterway, every barrel that crosses it carries a permanent cost that did not exist before February.
Markets pricing oil back to its prewar baseline are pricing an outcome that the diplomacy may not actually deliver.
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