**Oil prices have fallen to a six-week low as reports emerge that Iran and the US have tentatively agreed to extend their fragile ceasefire, with West Texas Intermediate falling nearly 2% to settle around $87 a barrel and global benchmark Brent settling near $92. President Donald Trump said he will make a "final determination" on a preliminary deal to prolong the truce with Iran, his statement coming after uncertainty over the status of an agreement that would extend the current truce by 60 days. Iran's Foreign Ministry said no final understanding has been reached yet, with message exchanges between the Iran and the US continuing, according to spokesman Esmail Baghaei told the state-run Islamic Republic News Agency. Crude has weakened in May on speculation some form of accord would be reached, although the warring parties have hailed progress before, only for the stalemate to drag on.
The proposed 60-day agreement would state that shipping through the Strait of Hormuz will be "unrestricted" with no tolls and Iran would be required to remove all mines from the strait within 30 days. However, President Donald Trump has yet to agree to the terms of the agreement, according to a person familiar with the matter, after Axios reported that shipping through the strait would be "unrestricted". Vice President JD Vance told reporters that it was too early to know "when or if" a deal with Iran would be reached, while Treasury Secretary Scott Bessent said only that "the teams have been going back and forth" when pressed if an interim agreement had been clinched. The effective closure of Hormuz — which is subject to blockades by Washington and Tehran — has triggered a global energy shock, with millions of barrels of daily oil supply shut off.
The United States imposed fresh sanctions on Thursday targeting Iran's military-linked oil trade network, despite reports suggesting that Washington and Tehran have reached a tentative agreement to ease restrictions on shipping through the Strait of Hormuz. The US Treasury Department sanctioned eight vessels involved in transporting Iranian crude oil and petroleum products to global markets, including the Marshall Islands-flagged tanker Flora, the Comoros-flagged crude carrier Hauncayo, and the Panama-flagged tanker Ill Gap. US Treasury Secretary Scott Bessent said the action is aimed at blocking revenue flows that Iran uses to fund its military and security apparatus, stating "We will not allow the Iranian government to increase its oil revenue for the purpose of reconstituting its armed forces and military capabilities." The sanctions also extend to more than 15 entities across Hong Kong, Dubai, Singapore and other jurisdictions, including vessel management firms accused of facilitating Iranian oil exports, with several firms alleged to have helped transport tens of millions of barrels through complex shipping arrangements.
Oil traders seem to be betting that the conflict is nearing a resolution, keeping price gains muted despite the positive developments. "The psychology of the market has been this is closer to the end rather than beginning," said Chevron Corp. Chief Executive Officer Mike Wirth on Bloomberg TV. "There still has been kinetic activity this week, some of which has been reported in the media — some of which not," Wirth noted, adding that "We see risks very real still in that environment." While the effective closure of Hormuz has curbed global energy supplies, a range of solutions, from bumper US exports, a slowdown in Chinese imports and emergency reserve releases have quelled the worst of the market impact. Roughly one-quarter of the non-Iranian large oil tankers trapped inside the Persian Gulf at the outbreak of the Iran war have managed to slip out.
For India, which relies on imports for about 90% of its crude oil needs, the conflict has added pressure to an already import-dependent energy bill. The Indian crude oil basket—comprising Sweet grade (Brent Dated) and Sour grade (Oman & Dubai average) crude imported by domestic refiners—stood at $102.05 per barrel on 26 May. So far in May, the Indian crude oil basket has averaged $107.45 a barrel, compared with $64.04 in the same month last year. The FY26 average stood at $70.99 a barrel. While the government has said supplies of crude oil, petrol and diesel remain adequate, it has acknowledged instances of shortages in some parts of the country, attributing them to panic buying and a shift of bulk industrial consumers to retail fuel outlets. In a statement on Wednesday, the ministry of petroleum and natural gas said industrial consumers, including factories and fleet operators, appear to have found an arbitrage opportunity in the government's consumer-friendly retail fuel pricing.
Even if a truce extension is agreed, multiple hurdles stand to impede the resumption of oil flows through the Strait of Hormuz. Among them, mines in the Hormuz waterway must be removed, shut-in fields may take months to restart, and damage to energy infrastructure from drone and missile strikes needs to be repaired. In addition, vessels would take weeks to reach importing nations. "Iran will have to abide by all agreements, and that in itself is a large ask for the market," said Dennis Kissler, head of energy trading at BOK Financial Securities Inc. "While a pickup in the Strait of Hormuz traffic is promising, we will need to see that stabilize for a while to justify WTI prices in the mid- to low-$80/bbl area." Data this week highlighted growing tightness in the US as the crisis dragged on, with distillate stockpiles sinking to the lowest in more than two decades, and crude at the Cushing, Oklahoma hub falling for a fifth week to 23 million barrels.
