Global crude oil prices are on track to record their sharpest monthly decline since 2020, as optimism over a possible US-Iran agreement continues to push traders away from fears of prolonged supply disruptions in the Middle East.
The steep downturn marks a sharp reversal from April’s historic oil rally, when escalating tensions in the Middle East triggered severe supply disruptions and sent energy markets into turmoil.
The latest slide is being driven by growing expectations that Washington and Tehran could extend their ceasefire arrangement and advance negotiations to reopen the Strait of Hormuz, a strategic maritime corridor that handles roughly one-fifth of global oil and fuel shipments.
Market participants increasingly believe restored access through the Strait could ease tanker congestion, improve supply flows and reduce the geopolitical premium that has supported elevated crude prices for months.
Reports indicate negotiators are discussing a framework that includes a 60-day ceasefire extension and measures linked to the reopening of the shipping route.
However, any agreement would still require approval from US President Donald Trump, while conflicting signals from both sides continue to cloud the outlook.
Despite the market optimism, industry experts warn that the path to normalising oil flows may be longer and more complex than investors currently expect.
Analysts note that even if a diplomatic breakthrough is secured, clearing shipping backlogs, restoring trade confidence and stabilising regional energy logistics could take several weeks or months.
Fresh military activity in the region has also highlighted the fragile nature of the negotiations, reminding traders that geopolitical risks remain deeply embedded in the global oil market.
For oil-exporting economies, sustained weakness in crude prices could tighten export earnings, weaken foreign exchange inflows and place added pressure on fiscal assumptions tied to oil revenue.
Market observers say crude’s next major move will depend on whether diplomatic momentum translates into a formal agreement and whether global energy supply chains can recover quickly enough to support lasting market stability.