July WTI crude oil settled at $88.60 on Thursday, May 28, capping a week in which prices fell $8.40, or 8.66%, as traders pulled a geopolitical risk premium out of the market. The contract swung between $94.70 and $87.11 during the week, then finished near the lower end as hopes grew that diplomacy between Washington and Tehran could eventually succeed.
The shift was sharp because the selling came even as traffic through the Strait of Hormuz remained severely disrupted and inventories continued to decline. Significant production losses across parts of the Middle East had yet to be restored, and early in the week prices were still supported by reports of continued military exchanges between the United States and Iran.
By Thursday, however, traders were focusing less on what had already happened and more on what might come next: the possibility that a ceasefire agreement could eventually bring barrels back to market. Reports emerged that U.S. and Iranian negotiators had reached the outline of a 60-day ceasefire extension tied to renewed discussions over Iran's nuclear program, though the proposal still required approval and numerous details remained unresolved.
That tension explains the week’s price action. Earlier in the year, Iran-related headlines repeatedly pushed crude oil prices higher, but during the week through May 28 the market reversed course as traders moved from buying on geopolitical fears to selling on ceasefire hopes. The result was a drop that left July WTI at $88.60 even with the supply strain still visible across the region.
The unresolved question is whether the market has priced out too much of the risk too soon. If the talks falter, the same disrupted shipping lane and unfinished production losses that failed to hold up prices this week could quickly come back to dominate crude oil prices today.
