Iranian state media said Tehran had received an initial draft of a 14-point Memorandum of Understanding (MOU) framework with the United States that would reopen the Strait of Hormuz, lift a US naval blockade on Iranian ports and pull US forces back from Iranian territory. The White House later posted on X that the report was untrue and described the MOU as fabricated, yet crude prices moved on the initial headline: Brent fell about 3% to near $93.00 a barrel, while West Texas Intermediate (WTI) slid almost 4% to around $90.00. The purported text is described as a one-page outline that leaves core issues, including Iranian nuclear enrichment, to a 60-day negotiation window, with Washington disputing that any document exists.
Operational constraints also sit in the background. Iran has mined the strait and de-mining is described as taking weeks, while the International Energy Agency estimates global oil stocks drew by roughly 250 million barrels across March and April; OECD on-land inventories fell by 146 million barrels in April. Brent is trading near $93.00 versus the daily 50 EMA close to $98.00 and a rising 200 EMA around $82.00, with $92.00 flagged as a key daily-close level; $96.50 and $100.00 are cited as resistance, and Stoch RSI is turning up from oversold intraday as daily momentum remains bearish. Separately, the Energy Information Administration (EIA) weekly report is delayed to Thursday 14:30 GMT; last week showed a 1.3 million barrel draw, with US stocks about 4% below the five-year average.
Market Reaction and Sentiment Disconnect
The market has decided to sell the rumor of a US-Iran deal, ignoring the White House’s denial that any agreement exists. We’ve seen Brent crude drop toward $93 a barrel as traders price in an end to the conflict. This creates a significant disconnect between market sentiment and the messy reality of the situation.
This optimism feels premature, especially as physical market data points to continued tightness. The latest figures from the American Petroleum Institute (API) on Tuesday showed a surprise crude build, but this was offset by a significant 4.5 million barrel draw in gasoline inventories, signaling robust pre-summer demand. Meanwhile, shipping insurance rates for tankers transiting the Persian Gulf remain at record highs, indicating the industry sees no immediate reduction in risk.
We believe the market is underestimating the time it will take to restore normal oil flows even if a deal is signed today. The International Energy Agency’s recent report highlighted that global oil stocks fell by 250 million barrels in March and April, and it will take many weeks, not days, to demine the Strait of Hormuz and coordinate the lifting of the naval blockade. This supply reality cannot be fixed with the stroke of a pen.
This isn’t the first time we have seen headlines create such sharp, temporary dislocations in the energy market. During the initial phases of the Russia-Ukraine conflict in 2022, prices swung wildly on diplomatic rumors that ultimately went nowhere, punishing traders who chased the initial moves. We see a similar setup here, where hope is driving prices more than hard data.
Technical Levels and Trading Outlook
From a technical standpoint, the selloff has brought Brent crude down to a critical support level around the $92-$93 handle. We view this as an opportunity to fade the selloff rather than chase it lower, as the risk-reward is now skewed to the upside if the peace narrative falls apart. A daily close back above $96.50 would suggest the bearish momentum has failed and put $100 back in play.
For traders looking at options, the elevated uncertainty makes buying volatility attractive. We think purchasing short-dated call spreads, such as the June weekly $95/$98 calls, provides a low-cost way to position for a snap-back rally if headlines sour. This defined-risk strategy allows us to capitalize on a quick reversal without taking on open-ended directional risk.
The delayed EIA inventory report on Thursday is the next scheduled data point. While a large draw in US inventories would normally be bullish, we expect its market impact will be minimal. The next major price move will almost certainly be triggered by another headline from Tehran or Washington, not by weekly storage figures.
