Brent crude oil prices crashed more than 5% on Wednesday after President Trump indicated a US-Iran agreement could be reached before his upcoming visit to China. The drop came the same day Trump halted Project Freedom, the US-led escort mission in the Strait of Hormuz, citing progress toward a final deal.
Why the market reacted
Traders had been pricing in a prolonged conflict that kept supply tight. Trump's shift — from military escorts to diplomacy — signaled that the risk of a full-blown blockade might be receding. Oil settled at $105.45 per barrel after the crash, still high but well below recent peaks. Rystad Energy quickly cut its 2026 Brent forecast from $97 to $87 per barrel, reflecting the new outlook.
The president warned that if negotiations collapse, strikes would resume at a much higher level. But for now, the prospect of a deal is enough to spook the market.
What a deal might look like
Any agreement would likely require Iran to surrender enriched uranium and halt parts of its nuclear program. That's a steep demand, but one the Islamic Republic has resisted for years. Iran's Revolutionary Guard Navy, meanwhile, ordered vessels to seek prior approval before transiting the Strait of Hormuz, saying unauthorized ships could be targeted. That order remains in place even as talks advance.
The Strait handles roughly a fifth of the world's seaborne oil. About 1,500 ships are still stranded near the waterway, unable to move until the security situation clears.
The fallout for global shipping and infrastructure
Even if a deal is signed tomorrow, oil flows won't resume overnight. Rystad Energy warned that physical oil flows will take six to eight weeks to normalize after any agreement. Global tanker networks need the same time to fully reposition, with insurers and shipowners requiring an additional two to five weeks on top of that.
Damaged regional infrastructure will take much longer. Rebuild costs across the Gulf are estimated between $34 billion and $58 billion. Iran and Qatar face the heaviest bills, both having taken direct hits to their export terminals and pipelines. Full recovery may stretch into the third quarter, Rystad's analysts said.
Impact on US gasoline
American drivers haven't seen much relief. US gasoline prices have stayed elevated near $4.50 per gallon throughout the conflict. Demand destruction has already started showing up in consumption data — people are driving less and cutting back on trips as pump prices bite.
A drop in crude eventually translates to lower gasoline costs, but that pass-through takes weeks. With the Strait still partially blocked and ships waiting, the price at the pump may not ease until summer.
The next real test will come when Trump lands in China. If no deal is announced during that visit, the ceasefire mood could evaporate fast. And those 1,500 stranded ships will still be sitting in the Gulf, waiting for a green light that might never come.
