Brent crude fell to roughly $89 a barrel on Friday, a drop of about 4.4% on the day, the moment President Donald Trump told reporters that a settlement with Iran was nearly done. By the standards of the past three months, that counts as good news. The global benchmark remains well above where it sat before the United States and Israel began striking Iran on 28 February, and analysts at Danske Bank are warning clients not to read too much into the relief. The conflict, in their view, is still the dominant force keeping a floor under the oil market, and that floor isn't going anywhere fast.
The logic is straightforward, and it has held for the better part of a quarter. Iran's effective closure of the Strait of Hormuz, the channel through which roughly a fifth of the world's oil and liquefied natural gas normally passes, took a meaningful slice of supply off the table. Markets hate that kind of uncertainty more than almost anything. Every time Washington and Tehran trade fire, as they did twice this week despite a ceasefire nominally in force since April, the risk premium baked into the price ticks higher. Every time Trump talks up a deal, it eases. The result is a market that lurches on headlines rather than fundamentals. That, frankly, is no way to plan a year's hedging.
The price of a war that won't quite end
The numbers tell the story better than any forecast. By the reckoning of the motoring group AAA, a gallon of regular petrol now costs American drivers an average of $4.15, a steep rise from the $2.98 recorded on 28 February, the day the strikes began. That is not a rounding error. It's the kind of move households feel every time they fill the tank, and it has fed directly into inflation data that has now risen for three consecutive months.
Bureau of Labor Statistics figures for May put consumer prices 4.2% higher than a year earlier, an acceleration from 3.8% in April that officials attributed largely to energy costs. Trump's response was, characteristically, hard to file under any conventional playbook. "I love the inflation," he told reporters at the White House, before telling the New York Post that the remark had been pulled out of context and that he had meant he loved the fact the numbers weren't worse. He predicted prices would fall "like a rock" once the war ended. He pointed to a trip to Iowa earlier in 2026 where he'd seen petrol at $1.85 a gallon, and promised a return to those levels soon.
The trouble with that promise is the calendar. Economists cited in the reporting have warned that even a quick settlement might not restore the normal flow of goods through Hormuz until 2027. Pipelines and shipping routes don't switch back on the day a memorandum is signed. Danske Bank's caution about oil prices staying supported rests on exactly this gap, the one between political declaration and physical reality.
What Trump says he's done at sea
One of the stranger episodes of the week came when Trump claimed on his Truth Social platform that the US had been running a covert operation through the strait, escorting tankers out at night with their transmitters switched off so Iran wouldn't notice. He put the figure at 200 vessels carrying more than 100 million barrels to buyers around the world. He used the same claim to explain a slight dip in oil prices, telling reporters that American forces had taken "millions of barrels" out of the contested zone.
The Guardian's energy team examined the claim and treated it with the skepticism it probably deserves. Moving 100 million barrels past a blockade undetected is, to put it mildly, a tall order, and nothing independent has confirmed the scale Trump described. What's harder to dismiss is the rhetoric around Iran's oil infrastructure. Trump threatened to seize Kharg Island, the terminal that handles about 90% of Iran's crude exports, and floated taking "total control" of regional oil and gas markets in the way he claimed the US had done with Venezuela. Iran's military answered with a warning of retaliation more severe than anything seen so far. Threats against export terminals are precisely the sort of thing that keeps a risk premium fat.
A deal that may or may not exist
The centerpiece of Friday's market move was Trump's assertion that negotiators had reached what he called a great settlement, with a signing ceremony possibly in Europe once the paperwork was finalized. He said the strait would reopen as soon as the documents were signed, and claimed the whole region was pleased.
Tehran told a different story. According to its foreign ministry spokesman Esmail Baghaei, the talk of a concluded agreement amounted to little more than conjecture, with no text yet finalized; he accused Washington of piling on demands Iran considered excessive and insisted his government would not breach its red lines. He did allow that most of the wording had been agreed. That's the recurring pattern here. Trump has talked up an imminent deal more than once since 20 April without one materializing, and on 27 May he walked away from terms he said he didn't like. The gap between the two sides' framing isn't cosmetic.
Iran's semi-official Mehr news agency published what it described as a 14-point draft, citing a source close to the negotiating team. The terms, none confirmed by either government, are sweeping: an immediate ceasefire on all fronts including Lebanon, the lifting of the US naval blockade within 30 days, the reopening of Hormuz within 30 days on Iranian terms, the suspension of oil sanctions, the release of $24bn in frozen Iranian funds, and a reconstruction package said to be worth at least $300bn. Reports cited by Axios, CNN and Bloomberg suggested a signing might happen in Geneva ahead of the G7 summit beginning in France on Monday. Israel, for its part, said it was not a party to the memorandum, even as Prime Minister Benjamin Netanyahu confirmed a call with Trump.
What the oil market is actually pricing
Strip away the diplomacy and the picture for traders is uncomfortable. A signed memorandum could trigger a sharp fall in Brent, the kind Friday's $89 print only hinted at. But the conditions attached to that fall are physical, not political: ships have to sail, terminals have to load, insurers have to write policies for routes they've been avoiding for months. Until then, the Iran conflict will keep oil prices supported, which is more or less what Danske Bank has been telling anyone who'll listen.
There's a political dimension too, and it cuts against Trump. Voters have ranked the economy at the top of their concerns ahead of November's midterm elections. Persistent energy-driven inflation raises the odds the Federal Reserve tightens to cool spending, and the Fed's 2% target looks distant with CPI running above 4%. For now inflation sits well below the 9.1% peak reached under Joe Biden in mid-2022, but the direction of travel is the problem, not the absolute level.
The thing worth watching isn't the next Trump press conference. It's whether tankers start moving through Hormuz with their transmitters back on, openly, in numbers anyone can count. That, more than any signing ceremony in Geneva, will tell us where oil prices are headed.