In recent trading sessions, crude oil benchmarks faced a steep decline, marking a weekly slump as speculation surrounding a US-Iran peace deal collided with increasing hostilities in the Strait of Hormuz. On May 6, Brent crude futures dropped by 7.83% to settle at $101.27 a barrel, while US West Texas Intermediate (WTI) fell by 7.03%, landing at $95.08.

The sudden drop followed reports that the US and Iran may be on the verge of an agreement, with sources indicating that negotiations are focused on a one-page memorandum of understanding to cease hostilities. Despite this optimism, uncertainty looms large, especially following US President Donald Trump's comments that any Iranian compliance remains speculative, underscoring the fragility of the situation.

The potential reopening of the Strait of Hormuz, a key maritime route for oil shipments, could significantly impact oil supply dynamics. However, analysts warn that even if an agreement is reached, normalizing oil flow through the strait would take weeks due to logistical and regulatory hurdles.

In the backdrop of these developments, crude prices have been highly sensitive to geopolitical shifts. The conflict sparked by US and Israeli military actions against Iran since late February has resulted in tightened oil supplies, driving prices to recent highs, with Brent crude peaking at around $126 per barrel earlier this month.

Supply disruptions have exacerbated the situation, leading to drawdowns in global oil inventories. The Energy Information Administration (EIA) reported a decrease in US crude stocks by 2.3 million barrels last week, compounding pressure on oil markets.

The growing tension in the region and fluctuating peace deal prospects contribute to a volatile oil market. As traders await definitive outcomes, industry experts caution against relying solely on diplomatic signals, asserting that the fundamental dynamics of supply and demand continue to play a crucial role in price formations.