Oil edges up after plunging on optimism over US-Iran agreement

Oil prices ticked higher after a sharp selloff driven by hopes that the US and Iran might actually reach an agreement over the Strait of Hormuz.

The whipsaw that got us here

WTI futures dropped 5.5% when markets began speculating that a resolution between Washington and Tehran was within reach. Traders priced in the possibility that Iranian oil would flow more freely, easing supply constraints that have kept crude elevated.

When talks collapsed over the weekend, prices reversed violently. Brent surged 8.36% to $103.16 per barrel. WTI climbed 8.22% to $104.57. The catalyst was a US announcement of a blockade on the Strait of Hormuz.

For context, the Strait of Hormuz handles roughly a fifth of the world’s daily oil consumption.

CENTCOM indicated that the blockade would affect all nations’ vessels entering Iranian ports, not just Iranian-flagged ships.

The US also presented Iran with a memorandum proposing a phased reopening of the Strait.

Why crude keeps swinging both ways

Analysts have suggested crude could stabilize somewhere between $80 and $100 per barrel if the geopolitical noise settles.

What this means for investors

For traders, the key risk is getting caught on the wrong side of a headline. The 5.5% WTI drop on diplomatic optimism and the 8%-plus reversal on the blockade announcement happened within days of each other.

What investors should watch closely is whether the US blockade escalates or de-escalates in the coming days. CENTCOM’s language about affecting “all nations’ vessels” suggests Washington is willing to use maximum pressure. Iran’s response will determine whether crude retests its recent highs or pulls back toward that theoretical stabilization zone.

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