U.S. West Texas Intermediate crude oil futures settled at $96.60 per barrel on May 22, capping a weekly loss of more than 8% as renewed diplomatic momentum between the United States and Iran raised hopes for an end to the conflict that has disrupted global energy markets since February. The sharp decline came after President Donald Trump said Monday he called off imminent strikes on Iran to allow for more negotiations.
The pullback from the $109 per barrel highs hit in mid-May reflects growing optimism that a framework for de-escalation may be within reach, though significant obstacles remain. Iran's Supreme Leader has insisted that the country's enriched uranium stockpile stay within its borders, and tolls on shipping through the Strait of Hormuz -- through which roughly 20% of the world's oil and liquefied natural gas transits -- remain a contentious issue.
What happened
Oil prices have been on a wild ride since the U.S. and Israeli-led military strikes against Iran began on February 28. Shipping traffic through the Strait of Hormuz has virtually halted, removing a critical chokepoint for global energy supply. WTI surged past $109 per barrel in mid-May as the disruption persisted, but the trajectory shifted dramatically this week when Trump announced the pause in military operations to pursue diplomatic channels.
Brent crude also declined sharply, settling near $100.20 per barrel. Energy executives have warned that full normalization of Middle East oil supply may not occur until 2027 due to the scale of disruptions caused by the conflict, including damaged infrastructure and the need to rebuild trust among shipping companies. OPEC+ has signaled willingness to increase output if prices remain above $95, but spare capacity is limited.
Why it matters
Oil prices above $95 per barrel are a significant driver of the elevated CPI that is keeping the Federal Reserve from cutting rates. Gasoline prices have soared since the start of the Iran war in late February, taking a direct toll on consumer wallets and feeding through to transportation and logistics costs across the economy. A diplomatic resolution that allows Hormuz traffic to resume could remove $10-15 per barrel of risk premium, potentially bringing WTI below $85 and providing meaningful inflation relief.