Crude Oil Prices Rebound Amid Iran Peace Deal Uncertainty and Sharp Inventory Drawdowns | May 21, 2026

Crude oil prices recovered on Thursday following two consecutive sessions of sharp declines, as investors reassessed the uncertain outlook for a potential peace agreement between the United States and Iran alongside tightening global oil inventories. 

Market sentiment remained volatile amid ongoing geopolitical tensions in the Middle East, particularly surrounding the Strait of Hormuz, a strategically important energy shipping route responsible for a significant portion of global oil and liquefied natural gas flows. 

Brent crude futures rose 81 cents, or 0.77%, to trade at US$105.83 per barrel, while US West Texas Intermediate (WTI) crude futures gained 97 cents, or 0.99%, to US$99.23 per barrel during early trade. 

According to market data, WTI crude futures were trading near US$98.73, while Brent crude futures hovered around the US$105.44 mark. 

Iran Peace Deal Uncertainty Supports Oil Prices 

Oil prices had fallen more than 5.6% in the previous session after US President Donald Trump stated that negotiations with Iran were in their final stages. However, the US administration also warned of possible further attacks if Tehran failed to agree to a peace settlement. 

Iran responded by warning against additional military action and announced measures aimed at strengthening control over the Strait of Hormuz through the establishment of a new “Persian Gulf Strait Authority”. 

The Strait of Hormuz remains a critical global energy corridor, previously handling oil and liquefied natural gas shipments equivalent to nearly 20% of global energy consumption before the conflict disrupted normal trade flows. 

Although active fighting has eased following the April ceasefire, restrictions on maritime traffic through Hormuz and continued geopolitical tensions have sustained concerns over potential supply disruptions. 

Read More: India Restores 97% Gas Supply to Fertiliser Plants Amid West Asia Crisis! 

Inventory Drawdowns Raise Supply Concerns 

Support for crude oil prices also came from significant declines in US oil inventories, which intensified concerns regarding tightening global supply conditions. 

The US Energy Information Administration reported that nearly 10 million barrels of oil were withdrawn from the Strategic Petroleum Reserve last week, marking the largest drawdown on record. 

Commercial crude oil inventories in the United States also declined by 7.9 million barrels to 445 million barrels, substantially exceeding analysts’ expectations for a drawdown of 2.9 million barrels. 

Meanwhile, gasoline inventories fell by 1.5 million barrels, while distillate stockpiles recorded a modest increase of 372,000 barrels. 

Analysts noted that continued inventory depletion, combined with restricted flows through the Strait of Hormuz, could tighten global crude and refined product supplies further in the coming weeks. 

Markets Remain Sensitive to Geopolitical Developments 

Energy markets continue to remain highly sensitive to developments surrounding the Iran negotiations and maritime conditions in the Middle East. 

Analysts believe that any breakthrough in diplomatic talks could trigger renewed pressure on oil prices, while failure to reach an agreement may sharply increase geopolitical risk premiums and reignite concerns about prolonged supply disruptions. 

At the same time, lower inventory levels across major economies are expected to provide underlying support to crude oil prices despite recent volatility. 

Conclusion 

Crude oil prices rebounded as traders balanced optimism surrounding possible US-Iran negotiations against persistent concerns over supply disruptions and rapidly declining inventories. With geopolitical uncertainty remaining elevated and global stockpiles tightening, oil markets are likely to stay volatile in the near term. 

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