UPDATE 3-Oil slips $5 as US, Iran seen moving closer to peace deal

Oil ​prices fell more than $5 to two-week ‌lows ​on Monday, as optimism grew that the United States and Iran were moving closer to a peace deal, even though they remain at odds over key issues such as ‌blockades on the Strait of Hormuz.

Brent crude futures were down $5.09, or 4.9%, to $98.45 a barrel at 0705 GMT, while U.S. West Texas Intermediate futures were at $91.38 a barrel, down $5.22, or 5.4%. Both contracts touched their lowest since May 7 earlier in the session. On ‌Saturday, U.S. President Donald Trump said Washington and Iran had "largely negotiated" an understanding on a peace deal that would reopen ‌the Strait of Hormuz, which carried a fifth of global shipments of oil and liquefied natural gas before the conflict. "Notwithstanding all the caveats and risks that remain to the peace deal and Strait of Hormuz, there is now some light at the end of the tunnel, which will bring some ⁠near-term oil ​price relief," said MST Marquee analyst ⁠Saul Kavonic. However, the two sides remain at odds over several difficult issues, with Trump saying on Sunday he had told his representatives not to ⁠rush into any deal.

"We've been at this stage before, only for talks to break down. Therefore, the market will likely be more ​cautious about overreacting," said Warren Patterson, head of commodities strategy at ING. Analysts expect a return to normal oil flows through ⁠the strait will take months, while damaged oil and gas facilities are repaired.

"The longer the crisis stretches, the more debatable it becomes whether world leaders genuinely ⁠want ​a quick end to disruptions," said Phillip Nova analyst Priyanka Sachdeva. U.S. energy firms responded to higher local energy prices by adding oil and natural gas rigs for the fifth week in a row, for the first time since February ⁠2025.

The rig count, an early indicator of future output, rose by seven to 558 in the week to May 22, ⁠its highest since June 2025. Even ⁠so, Baker Hughes said the total count was still down eight rigs, or 1% below this time last year. "Momentum indicators suggest markets are attempting to stabilise after last week's aggressive ‌selloff, but conviction remains weak," ‌Sachdeva said.

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