Brent crude steadied near the $100 per barrel mark on Thursday after a historic two-day selloff erased much of this week’s war-driven rally, as traders weighed growing optimism around a possible U.S.-Iran peace framework against lingering uncertainty over whether any formal agreement will materialize.
Brent was trading around $100.19 per barrel on May 7, down 1.07% from the previous session, after plunging more than 7.8% on Wednesday, when it settled at $101.27, having briefly dropped below $100 for the first time since April 22.
The sharp decline followed reports that Washington had sent Tehran a one-page memorandum of understanding through Pakistani intermediaries aimed at formally ending hostilities and gradually reopening the Strait of Hormuz, the critical shipping corridor that handles roughly a fifth of global oil flows. Iran said it was reviewing the proposal and is expected to respond within days, though broader nuclear-related negotiations are reportedly set for later.
President Donald Trump, while signaling progress, warned that assuming Iranian acceptance would be premature and said military strikes could resume if talks collapse.
The latest price action marks a dramatic reversal from earlier conflict highs, when Brent surged above $114 per barrel amid fears of prolonged disruption in the Strait. While prices have now retreated sharply on “peace dividend” expectations, Brent remains up 5.74% over the past month and 59.44% higher year-on-year, underscoring how deeply the Middle East conflict has reshaped global energy markets even as diplomatic efforts gain traction.
Despite futures falling, physical market pressures remain elevated. The Strait’s disruption has already triggered major supply dislocations across Asia, where refined fuel exports have plunged and buyers increasingly turned to U.S. crude, pushing American oil exports to record highs. This suggests that even if a peace agreement is reached, normalization in shipping and supply chains could take weeks or months rather than days.
Markets are now balancing two competing realities: headline optimism around diplomacy, which is pulling prices lower, and the practical reality that restoring normal crude and refined product flows through the region may be far slower. That tension is likely to keep Brent volatile near current levels as investors assess whether diplomacy can translate into actual supply normalization.
