U.S. Treasury Secretary Scott Bessent declared that Washington’s pressure campaign had "laid Iran’s economy to waste," forcing Tehran to negotiate a deal that reopened the Strait of Hormuz. The narrow waterway, which carries nearly one-fifth of the world’s oil, was choked off during the U.S.–Israeli war with Iran, causing energy prices to skyrocket and driving U.S. inflation to 4.2% in May. Energy costs accounted for over 60% of that increase, with gasoline prices nearly 59% higher than a year ago.
The agreement immediately unleashed a flood of crude. Energy Secretary Chris Wright reported that 20 million barrels exited the strait in 24 hours on 72 ships, doubling prior traffic. Oil prices collapsed: Brent crude fell to around $72 per barrel, while WTI dropped near $69—levels not seen since before the February 28 strikes. Prices have tumbled over 20% this month, erasing nearly all the war premium.
However, the sudden supply shock is creating a new dilemma. Apollo chief economist Torsten Slok warned that cheaper oil could "overheat" an already sturdy economy, pushing the Federal Reserve to raise interest rates. The Fed itself flagged an "increased risk" that inflation may stay elevated, with most officials hinting a rate hike could be necessary. The latest jobs report showing 172,000 new nonfarm payrolls adds to the hawkish case.
Separately, tanker traffic through Hormuz continues to rebound—mainly from stranded outbound vessels. An Iranian attack on a cargo ship near Oman briefly spiked prices but did not reverse the downward trend. Earthquakes in Venezuela also threaten minor supply disruptions, but the market remains focused on the tenuous U.S.–Iran peace and its macroeconomic fallout.
