WTI Crude Oil futures dropped over 7% this week, trading near $95 per barrel on May 8 as Trump confirmed the Iran ceasefire remains intact following US-Iranian naval clashes in the Strait of Hormuz. The IEA warns 14 million barrels per day remain offline.

Key Highlights

  • WTI crude is trading near $95 per barrel on 8 May, down over 7% on the week as diplomatic signals tempered near-term Supply fears.
  • US forces struck military targets in Iran after Tehran fired on three American destroyers in the Strait of Hormuz; Trump confirmed vessels exited safely.
  • The IEA estimates the conflict is removing approximately 14 million barrels per day from global supply.
  • The strait has been effectively closed since late February, forcing production shutdowns across the region.
  • Markets remain suspended between ceasefire optimism and the structural risk of renewed escalation.

Ceasefire Signal Drives the Selloff

WTI crude oil futures declined approximately 7% this week, stabilising near $95 per barrel on 8 May, after President Donald Trump confirmed the ceasefire with Iran remained in place despite fresh military exchanges in the Strait of Hormuz. Traders read diplomatic continuity as a signal that the most severe supply disruption scenario had not yet materialised, triggering a partial unwind of the escalation premium built into prices over prior sessions.

The move reflected a recalibration of risk, not a resolution. The strait has been effectively closed since late February, forcing production shutdowns across the region. That structural disruption remains fully intact.

Military Exchange, Controlled Framing

US Central Command confirmed American forces struck Iranian military targets after Tehran fired on three US destroyers in the strait. Both sides moved quickly to contain the narrative. Officials stressed they were not seeking broader escalation, and Trump confirmed the vessels exited without damage. Markets interpreted the controlled framing as deliberate, assigning lower probability to full-scale conflict and adjusting prices accordingly.

Supply Disruption Remains Severe

Diplomatic relief should not obscure the scale of the damage. The IEA has warned the conflict is removing approximately 14 million barrels per day from global supply, a significant share of world crude consumption. The Strait of Hormuz handles roughly 20% of global oil trade, and its closure has forced shutdowns across multiple Gulf producers. The UAE has separately reported intercepting missiles and drones near the strait, confirming the operational environment remains hostile. Supply routes have not normalised, and physical unavailability of crude cannot be quickly resolved through diplomatic signalling alone.

Two Scenarios, One Price

Markets are currently pricing two competing outcomes simultaneously. The first is a diplomatic pathway in which the ceasefire holds and the strait gradually reopens, easing supply constraints over the medium term. The second is renewed escalation, which would push WTI materially beyond its current range and tighten already stressed global inventories further.

WTI near $95 reflects ceasefire continuation as the base case. It does not reflect a reopening. The asymmetry here is meaningful: a resolution produces a gradual, measured price decline, while a breakdown carries significantly greater upside price velocity.

Analytical Framing

WTI at $95 is not a resolved market. It is a market in suspension, holding a diplomatic assumption that has not yet been validated by physical supply recovery. The Strait of Hormuz remains closed, 14 million barrels per day remain offline, and Gulf production has not resumed. Every session between now and a verified reopening carries binary risk. Traders watching ceasefire language should equally watch the strait itself, because it is the reopening of that chokepoint, not the tone of a press statement, that will determine where crude prices settle.