The rebound
Brent crude climbed back above $103 on Wednesday, clawing back ground after this week's brutal selloff. WTI rose $2.58 to $97.66 per barrel. Both benchmarks gained more than 2% on the session.
The catalyst was hard to miss. A US Navy fighter jet strafed an Iranian-flagged oil tanker in the Gulf of Oman on Tuesday, the Pentagon confirmed. The F/A-18 Super Hornet, flying off the USS Abraham Lincoln, disabled the rudder of the M/T Hasna with 20mm cannon fire after the tanker blew past multiple warnings and attempted to breach the American naval blockade.
That was enough to gut the deal narrative that had sent Brent crashing $17 in four days. Traders who bet on a diplomatic breakthrough scrambled to cover short positions.
Cannon fire during a ceasefire
The timing makes the tanker incident hard to square. Both countries are officially observing a ceasefire. Trump envoys Steve Witkoff and Jared Kushner are negotiating a 14-point memorandum with Tehran through Pakistani mediators. And a Navy pilot just put cannon rounds into an Iranian ship.
The Pentagon called it a blockade enforcement action. The M/T Hasna was carrying crude and refused to halt, officials said. But for a market already skeptical about how long this ceasefire holds, the takeaway was straightforward: guns are still going off.
Gold told the same story, trading at $4,710.90 per ounce.
Iran's deadline arrives
The 48-hour window Washington gave Tehran to respond to the deal proposal expires today. Iran's foreign ministry spokesperson Esmaeil Baghaei said the country is "still reviewing" the terms, which lay out a 30-day negotiation period covering the Strait of Hormuz, nuclear enrichment, and sanctions relief.
Enrichment remains the wall. Washington wants a 20-year moratorium. Iran has offered five. Diplomatic sources have floated 12 to 15 years as a possible middle ground, but neither side has moved publicly.
Project Freedom, Trump's plan to escort commercial ships through the Strait, sits frozen after Saudi Arabia refused to open its airspace. Roughly 1,600 ships carrying 23,000 crew members from 87 nations are stuck in the Persian Gulf.
Squeeze keeps building
If Iran rejects the deal or lets the clock run out, crude has room to run higher. The Strait of Hormuz has been effectively shut since February 28, choking off roughly 20% of the world's seaborne oil trade.
OPEC output fell to a 36-year low of 20.55 million barrels per day in April. The 188,000 barrel-per-day increase approved for June barely registers against the 12 to 15 million barrels per day the war has knocked offline.
Tehran's answer will set the next direction. Traders are not waiting patiently.