Oil Price Today (May 6): Crude oil falls below $110, down 6% in just two sessions. What’s behind the dip?

Synopsis

Oil prices dipped for a second day as U.S. President Trump hinted at a potential peace agreement with Iran, leading to hopes of restored Middle East supply routes. Trump announced a temporary pause on escorting ships through the Strait of Hormuz, a key oil transit point.

Oil prices declined for a second straight day on Wednesday as hopes grew that disrupted supplies from the Middle East could return if a potential U.S.–Iran peace agreement materialises. This followed comments from U.S. President Donald Trump hinted at progress toward ending the conflict.

Trump said on Tuesday that an operation to escort ships through the Strait of Hormuz would be paused briefly, citing movement toward a broader agreement with Iran, though he did not provide specifics. There was no immediate response from Tehran, where it was still early morning on Wednesday.

Crude oil price on May 6

Brent crude for July delivery dropped $1.52, or 1.38%, to $108.35 a barrel, after losing 4% in the previous session. U.S. West Texas Intermediate crude for June fell $1.50, or 1.47%, to $100.77, following a 3.9% decline on Tuesday.

He added that the U.S. Navy would continue its blockade of Iranian ports. The Strait of Hormuz, which normally handles about one-fifth of global oil and natural gas shipments, has largely been shut since the U.S.-Israeli conflict with Iran began on February 28.

The disruption has tightened global supplies, pushing Brent prices last week to their highest level since March 2022.

In a social media post, Trump said both sides had agreed that while the blockade would remain fully in place, “Project Freedom” would be paused temporarily to allow time for the agreement to be finalised.

His remarks came shortly after U.S. Secretary of State Marco Rubio updated reporters on the escort initiative announced on Sunday to help stranded tankers pass through the strait. On Monday, the U.S. military said it had destroyed several Iranian small boats along with cruise missiles and drones while escorting two vessels out of the Gulf.

On Tuesday, Washington played down the prospect of a return to active war, with Defense Secretary Pete Hegseth confirming the truce that began just under a month ago is still in place. Meanwhile, General Dan Caine, the chairman of the Joint Chiefs of Staff, said attacks by Tehran on vessels in the Persian Gulf and the United Arab Emirates didn’t constitute a breach of a ceasefire.

Experts still worried

On the outlook, Haitong Futures noted that the current ceasefire could be temporary. A lack of progress in U.S.-Iran talks may lead to renewed escalation, potentially pushing oil prices higher.

Nuvama Institutional Equities echoed a similar view, stating that an extended shutdown of the Strait of Hormuz, which carries around 20 million barrels per day, could lift crude prices into the $110 to $150 range.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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