Crude Oil Prices Slip on Diplomatic Hopes to End Iran War

Rich Asplund

Tue, May 19, 2026 at 3:18 PM EDT 5 min read

June WTI crude oil (CLM26) on Tuesday closed down -0.89 (-0.82%), and June RBOB gasoline (RBM26) closed down -0.0645 (-1.72%).  Crude oil and gasoline prices retreated on Tuesday after the dollar index ($DXY) jumped to a 6-week high.  Crude prices also moved lower after President Trump late Monday said he called off a strike on Iran scheduled for Tuesday after Gulf allies asked for more time to give diplomacy a chance.   Losses in crude were limited as the Strait of Hormuz remains closed, tightening global oil supplies.

Hopes that a peace deal to end the US-Iran war is near are undercutting crude prices after President Trump on Tuesday said that Iran is "being reasonable" and that he will "maybe" give them until early next week to make a peace deal.

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Crude prices added to their losses on Tuesday after a senior NATO military official said the group is considering helping ships pass through the Strait of Hormuz if the waterway isn't reopened by early July.

Ramped-up geopolitical tensions are supportive for crude prices after Reuters reported Monday that Pakistan has deployed 8,000 troops, a squadron of fighter jets, and an air defense system to Saudi Arabia as part of a mutual defense pact, a deployment described as a "substantial, combat-capable force" to support Saudi Arabia if it comes under further attack.  On Sunday, the UAE reported that a drone sparked a fire in a power station at the United Arab Emirates' Barakah nuclear plant, and Saudi Arabia said it intercepted and destroyed three drones that entered its airspace.

Last Wednesday, the International Energy Agency (IEA) said in a monthly report that global observed oil inventories declined at about 4 million bpd in March and April, and that the market will remain "severely undersupplied" until October, even if the conflict ends next month.

Energy prices remain underpinned by the US-Iran war, which is keeping the Strait of Hormuz essentially closed.  The ongoing conflict is exacerbating global oil and fuel shortages, as about a fifth of the world's oil and liquefied natural gas transits through the strait.  Goldman Sachs estimates that crude output in the Persian Gulf has been curtailed by about 14.5 million bpd, and that the current disruption has drawn down nearly 500 million bbl from global crude stockpiles, which could hit a billion bbl by June.  Persian Gulf oil producers have been forced to cut production by roughly 6% due to the closure of the Strait of Hormuz as local storage facilities reach capacity.  Last Thursday, the IEA said that more than 80 energy facilities had been damaged during the conflict, and that recovery could take as long as 2 years.