Oil Prices Rebound as Markets Reassess US-Iran Peace Deal Prospects

Mumbai | 7 May 2026 

Oil prices recovered on Thursday after plunging more than 7% in the previous session, as investors reassessed the likelihood and timing of a possible peace agreement between the United States and Iran. Brent crude futures rose 88 cents, or 0.9%, to $102.15 a barrel by 0032 GMT. US West Texas Intermediate crude gained $1.12, or 1.2%, to $96.20 a barrel. 

Why Did Oil Prices Rebound on Thursday? 

The bounce followed steep losses on Wednesday, when both benchmarks fell to two-week lows on optimism that diplomatic efforts could end the ongoing conflict in West Asia. Sentiment turned cautious again after US President Donald Trump said it was “too soon” for face-to-face talks with Tehran, signalling that negotiations remained fragile. 

A senior Iranian lawmaker dismissed the latest US proposal as more of a “wish list” than a concrete framework for agreement. An Iranian foreign ministry spokesperson said Tehran would communicate its response after completing its review of the proposal. Trump separately expressed confidence about the diplomatic push, saying he believed Iran wanted an agreement. 

According to a report by US media outlet Axios, Washington expects Tehran to respond within the next 48 hours on several key points tied to a possible deal. The report said the two sides were closer to an agreement than at any point since the conflict began. 

How Are Supply Disruptions Affecting Oil Markets? 

Even if a peace deal is reached soon, disruptions to crude flows from the West Asia Gulf are expected to persist for several weeks. Shipments would resume gradually and take time to reach refiners globally. In the interim, refiners and energy companies are likely to continue drawing down inventories to meet peak summer fuel demand. 

US government data released on Wednesday showed crude and fuel inventories declined again last week. The Energy Information Administration said stockpiles continued to tighten as countries sought to offset supply disruptions linked to the Iran crisis. 

Investor sentiment remains volatile as markets attempt to gauge whether a formal agreement could ease geopolitical tensions and reduce risks to oil supply flows through the Strait of Hormuz. 

What Does PL Capital Research Say on Global Oil Supply? 

PL Capital Research notes that the conflict in West Asia has triggered a significant disruption in global fuel markets, tightening supply and increasing volatility in energy prices. The blockade of the Strait of Hormuz, which carries around 20% of global crude oil supply, remains a key flashpoint. 

PL Capital Research estimates total supply disruption of around 15mbpd, partly offset by rerouting, emergency releases, and selective Hormuz access of around 10.1mbpd. This leaves a residual supply gap of 4.8mbpd that needs to be compensated. 

On the demand side, the EIA has cut US and Europe demand by around 1.0mbpd for 2026. The IEA estimates demand destruction of around 2.5mbpd in April 2026. PL Capital Research notes that if demand absorption of the residual imbalance materialises, crude prices are likely to soften from elevated levels. 

Outlook 

Investors are also tracking geopolitical developments beyond West Asia. Trump and Chinese President Xi Jinping are scheduled to meet next week, a development that could influence broader market sentiment and global demand expectations. Near-term oil price direction will depend on Tehran’s response to the US proposal and the pace at which crude flows from the West Asia Gulf normalise. 

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