The underlying logic behind the oil price crash: The market has figured out both sides' true intentions.
2026-05-29 18:52:44
On May 28, according to sources familiar with the matter in the United States, US and Iranian negotiators outlined a framework for a 60-day ceasefire extension memorandum of understanding (MOU), which includes a phased lifting of the blockade of the Strait of Hormuz and the subsequent initiation of consultations related to Iran's nuclear program. Following this news, international crude oil futures prices fell sharply.
However, as of now, Trump has not formally approved the document, and the White House has declined to comment officially. Previously, the Trump administration had repeatedly hinted that an agreement was imminent, but these claims were consistently denied or downplayed by Iran. Iran has also clearly stated that negotiations on the Iranian nuclear issue will be postponed to the next stage, a position strongly opposed by anti-Iran hawks within the US Republican Party. The current consensus on a ceasefire is still far from completely resolving the conflict between the two sides.
The real question worth exploring is: what kind of expectations is the capital market pricing in right now? The answer is not that the conflict has been completely resolved, but that the true demands and bottom lines of both sides in the game have been thoroughly understood by each other.
Trump is eager to extricate himself.
To understand the logic behind this round of oil price declines, we must first understand Trump's current situation. Numerous signs point to a clear conclusion: since the beginning of the conflict, the US has been seeking a dignified way out.
According to senior White House officials, Trump had previously told his staff that he did not want to get bogged down in a protracted war and was eager to end the standoff through negotiations. He also repeatedly asked his team to send signals to the outside world that "the conflict will end in four to six weeks," a timeline that was described by insiders as "unstable and difficult to deliver."
The underlying political pressure is significant. A Reuters/Ipsos poll shows that Trump's approval rating on the economy has fallen to its lowest point of his term, with 61% of Americans disapproving of his measures to combat inflation. Even among Republican supporters, the negative view is 40%. Other polls show that nearly 60% of respondents oppose US military action against Iran. With the midterm elections approaching, persistently high oil prices are continuing to erode the Republican Party's voter base.
Yardeni Research analyst Ed Yardeni succinctly observed: Iran has already calculated this political outcome—as long as oil prices remain high and the November midterm elections are delayed, the Republican Party is likely to lose control of both the House and Senate. For Iran, its most powerful bargaining chip is not military weapons, but time.
The cabinet meeting on May 27th further exposed Trump's passive position. He publicly declared that he would never sign a "disadvantageous deal," emphasizing that he would only back down when a "perfect deal" was reached. Repeatedly emphasizing his refusal to back down may be a typical manifestation of being on the defensive in a power struggle: the party truly in control doesn't need to constantly reiterate its bottom line to the outside world.
A similar trajectory can be seen in the previous situation in Yemen. After Trump officially began his second term in January 2025, the US launched a military operation against the Houthis. After weeks of operation and enormous costs, the US hastily declared the operation over, claiming the Houthis had sought peace. However, the reality was that the Houthis' military strength was not severely damaged; they merely suspended attacks on US ships. Past cases demonstrate that Trump habitually uses "declarations of victory" to mask substantive compromises and a deliberate withdrawal from the conflict.
The market has already seen through it: the previously hyped risks of all-out war and threats of extreme conflict are essentially just a means of exerting maximum pressure.
Iran's Signals: Understanding Restraint from Three Dimensions
In contrast to Trump's predicament, Iran has recently released a series of key signals. When interpreting these signals, it's crucial to avoid common pitfalls: don't focus solely on its high-profile public statements, but rather pay attention to what Iran chooses not to do at critical junctures—this truly reflects its stance.
Signal 1: The nationwide internet outage, which lasted for 87 days, has officially ended.
On May 26, Iran ended its 87-day nationwide internet ban, gradually restoring international internet access. Records from internet monitoring agency NetBlocks show that this nationwide internet outage was one of the longest-lasting state-level internet censorship events in modern history. Iran's official cyberspace governance working group passed a resolution to restore internet access to its pre-ban state in January 2026.
State-level internet censorship is never just a simple technical control measure. The complete lifting of the censorship now signifies that Iran's leadership believes the most tense phase of the domestic crisis has passed. This is a de-escalation signal from within the regime, and its credibility far exceeds that of routine diplomatic statements.
Signal Two: As friction continues to escalate, Iran maintains restraint.
During the process of establishing a ceasefire framework, small-scale skirmishes between the US and Iran never ceased. The most crucial details emerged after each incident: the US military struck Iranian missile facilities and ships at sea several times, prompting Iran to issue strongly worded statements accusing the US of violating the ceasefire agreement, but without taking any reciprocal military retaliatory action.
Chairman of the Joint Chiefs of Staff General Kane also defined the sporadic clashes around the Strait of Hormuz as "low-intensity skirmishes," stating bluntly that the situation has not yet crossed the red line of resuming a large-scale war.
This detail is intriguing. Market analysts point out that, faced with Iran's targeted actions, the US has consistently downplayed the situation, constantly seeking explanations for the restraint exercised by both sides. This cautious attitude exposes Washington's eagerness to end the standoff and directly weakens the US's bargaining power at the negotiating table. In other words, Iran has clearly grasped its opponent's mindset: the US has no intention of launching a new round of large-scale attacks. A major power determined to escalate the conflict will not repeatedly emphasize that "the ceasefire is still progressing" after being harassed.
Signal Three: A softened stance at the negotiating table, signaling goodwill.
After concluding intensive negotiations in Doha, the Iranian negotiating team returned to Tehran. The talks even touched upon the core and sensitive issue of Iran's nuclear material stockpile. Iran described the round of talks as "overall positive." On May 24, Iranian President Pezechzian proactively stated that Iran was willing to make a commitment to the international community that it would never develop nuclear weapons.
The key point of this statement is not the credibility of the promise itself, but rather Iran's act of proactively sending a signal. This is a conciliatory gesture towards its negotiating partner, which is completely different from actively seeking a strategic offensive.
Three key signals clearly indicate that: the lifting of internet restrictions demonstrates a stabilizing domestic situation in Iran; the decision not to escalate tensions reflects a rational choice after recognizing the US's lack of intention to wage war; and the softening stance on the nuclear issue suggests an attempt to explore the feasibility of negotiations. Currently, Iran is not in a strategic offensive posture.
The real turning point: the complete bankruptcy of the extreme conflict narrative.
By combining the behavioral logic of both the US and Iran, the underlying logic of this round of oil price repricing becomes clear.
Looking back at the market highs in March and April this year: Trump made a tough statement, threatening to destroy key Iranian infrastructure. Driven by extreme panic, WTI crude oil futures prices once broke through $115 per barrel. Iran also took the opportunity to send retaliatory signals, threatening to increase its attacks on energy transport routes in the Persian Gulf. The pessimistic view that "oil prices will rise to $200" spread in the market.
However, the actual situation has deviated from extreme expectations: in the face of repeated provocations from Iran, the United States has been de-escalating the situation; when faced with military provocations, Iran has always held its ground and refused to launch a full-scale counterattack; both sides are using third-party channels to explore a path to a peaceful withdrawal.
Current Brent crude oil prices have fallen about 9% from their high a month ago, but are still more than 30% higher than pre-conflict levels. This price structure accurately reflects the market consensus: the most intense phase of the conflict has ended, but the premium brought about by geopolitical risks has not completely subsided. The core pricing logic of the market now is not "the complete resolution of the conflict," but rather that the worst-case scenario has been ruled out.
Outlook: Friction becomes the norm, and a price ceiling is established.
Looking ahead to the future trend of the crude oil market, and considering the game between the two sides, several clear judgments can be made:
The conflict ceiling has been locked.
The true bottom lines and demands of both the US and Iran have been revealed. Trump, constrained by the War Powers Act, low approval ratings, and the midterm elections, has accepted the reality of "limited objectives and a dignified exit." Iran, under long-term sanctions and external shocks, has maintained rationality and restraint, refusing to escalate the conflict. The mutual confirmation of each other's bottom lines significantly reduces the probability of a further full-scale escalation of the situation.
The process of implementing the agreement has been fraught with twists and turns.
Even if a preliminary framework for a ceasefire is reached, its implementation will be repeatedly stalled. Just after news emerged from the US that an agreement was nearing completion, the US military launched strikes against southern Iran under the pretext of "self-defense," prompting Iran to issue a stern warning, and Brent crude oil prices briefly rebounded to the $100/barrel mark. This state of "negotiations and frictions" will likely become the norm for the coming months.
One-sided market trends are unlikely on both the supply and demand sides.
On the supply side: Even if the Strait of Hormuz fully reopens to navigation, the damaged Iranian oil fields and related facilities will not be able to return to pre-conflict production levels in the short term. On the demand side: The International Energy Agency (IEA) has confirmed that global crude oil demand in 2026 will decline slightly year-on-year, with high interest rates suppressing energy consumption in developed economies, coupled with the continued acceleration of renewable energy substitution. Considering the overall supply and demand situation, oil prices are unlikely to experience another unilateral surge, nor will they quickly return to pre-conflict lows.
Conclusion
The recent sharp decline in oil prices is essentially a shift in market narrative: from "all-out war and escalating conflict" to "continued localized friction with both sides willing to de-escalate." The ceasefire-related memorandums are not the root cause of the price drop, but merely evidence of the market's assessment.
What truly drives market repricing is the real intention behind the actions of both sides: on one side is the United States, which is bound by high oil prices, low public opinion, and election pressure, and is eager to find a way out; on the other side is Iran, which has weathered a period of internal turmoil, maintained restraint in the face of friction, and actively released goodwill for negotiations.
The peak of the current geopolitical conflict has passed, and the long-term post-conflict struggle will become the main theme of the market, with no new high point of conflict likely to occur.
However, as of now, Trump has not formally approved the document, and the White House has declined to comment officially. Previously, the Trump administration had repeatedly hinted that an agreement was imminent, but these claims were consistently denied or downplayed by Iran. Iran has also clearly stated that negotiations on the Iranian nuclear issue will be postponed to the next stage, a position strongly opposed by anti-Iran hawks within the US Republican Party. The current consensus on a ceasefire is still far from completely resolving the conflict between the two sides.
The real question worth exploring is: what kind of expectations is the capital market pricing in right now? The answer is not that the conflict has been completely resolved, but that the true demands and bottom lines of both sides in the game have been thoroughly understood by each other.
Trump is eager to extricate himself.
To understand the logic behind this round of oil price declines, we must first understand Trump's current situation. Numerous signs point to a clear conclusion: since the beginning of the conflict, the US has been seeking a dignified way out.
According to senior White House officials, Trump had previously told his staff that he did not want to get bogged down in a protracted war and was eager to end the standoff through negotiations. He also repeatedly asked his team to send signals to the outside world that "the conflict will end in four to six weeks," a timeline that was described by insiders as "unstable and difficult to deliver."
The underlying political pressure is significant. A Reuters/Ipsos poll shows that Trump's approval rating on the economy has fallen to its lowest point of his term, with 61% of Americans disapproving of his measures to combat inflation. Even among Republican supporters, the negative view is 40%. Other polls show that nearly 60% of respondents oppose US military action against Iran. With the midterm elections approaching, persistently high oil prices are continuing to erode the Republican Party's voter base.
Yardeni Research analyst Ed Yardeni succinctly observed: Iran has already calculated this political outcome—as long as oil prices remain high and the November midterm elections are delayed, the Republican Party is likely to lose control of both the House and Senate. For Iran, its most powerful bargaining chip is not military weapons, but time.
The cabinet meeting on May 27th further exposed Trump's passive position. He publicly declared that he would never sign a "disadvantageous deal," emphasizing that he would only back down when a "perfect deal" was reached. Repeatedly emphasizing his refusal to back down may be a typical manifestation of being on the defensive in a power struggle: the party truly in control doesn't need to constantly reiterate its bottom line to the outside world.
A similar trajectory can be seen in the previous situation in Yemen. After Trump officially began his second term in January 2025, the US launched a military operation against the Houthis. After weeks of operation and enormous costs, the US hastily declared the operation over, claiming the Houthis had sought peace. However, the reality was that the Houthis' military strength was not severely damaged; they merely suspended attacks on US ships. Past cases demonstrate that Trump habitually uses "declarations of victory" to mask substantive compromises and a deliberate withdrawal from the conflict.
The market has already seen through it: the previously hyped risks of all-out war and threats of extreme conflict are essentially just a means of exerting maximum pressure.
Iran's Signals: Understanding Restraint from Three Dimensions
In contrast to Trump's predicament, Iran has recently released a series of key signals. When interpreting these signals, it's crucial to avoid common pitfalls: don't focus solely on its high-profile public statements, but rather pay attention to what Iran chooses not to do at critical junctures—this truly reflects its stance.
Signal 1: The nationwide internet outage, which lasted for 87 days, has officially ended.
On May 26, Iran ended its 87-day nationwide internet ban, gradually restoring international internet access. Records from internet monitoring agency NetBlocks show that this nationwide internet outage was one of the longest-lasting state-level internet censorship events in modern history. Iran's official cyberspace governance working group passed a resolution to restore internet access to its pre-ban state in January 2026.
State-level internet censorship is never just a simple technical control measure. The complete lifting of the censorship now signifies that Iran's leadership believes the most tense phase of the domestic crisis has passed. This is a de-escalation signal from within the regime, and its credibility far exceeds that of routine diplomatic statements.
Signal Two: As friction continues to escalate, Iran maintains restraint.
During the process of establishing a ceasefire framework, small-scale skirmishes between the US and Iran never ceased. The most crucial details emerged after each incident: the US military struck Iranian missile facilities and ships at sea several times, prompting Iran to issue strongly worded statements accusing the US of violating the ceasefire agreement, but without taking any reciprocal military retaliatory action.
Chairman of the Joint Chiefs of Staff General Kane also defined the sporadic clashes around the Strait of Hormuz as "low-intensity skirmishes," stating bluntly that the situation has not yet crossed the red line of resuming a large-scale war.
This detail is intriguing. Market analysts point out that, faced with Iran's targeted actions, the US has consistently downplayed the situation, constantly seeking explanations for the restraint exercised by both sides. This cautious attitude exposes Washington's eagerness to end the standoff and directly weakens the US's bargaining power at the negotiating table. In other words, Iran has clearly grasped its opponent's mindset: the US has no intention of launching a new round of large-scale attacks. A major power determined to escalate the conflict will not repeatedly emphasize that "the ceasefire is still progressing" after being harassed.
Signal Three: A softened stance at the negotiating table, signaling goodwill.
After concluding intensive negotiations in Doha, the Iranian negotiating team returned to Tehran. The talks even touched upon the core and sensitive issue of Iran's nuclear material stockpile. Iran described the round of talks as "overall positive." On May 24, Iranian President Pezechzian proactively stated that Iran was willing to make a commitment to the international community that it would never develop nuclear weapons.
The key point of this statement is not the credibility of the promise itself, but rather Iran's act of proactively sending a signal. This is a conciliatory gesture towards its negotiating partner, which is completely different from actively seeking a strategic offensive.
Three key signals clearly indicate that: the lifting of internet restrictions demonstrates a stabilizing domestic situation in Iran; the decision not to escalate tensions reflects a rational choice after recognizing the US's lack of intention to wage war; and the softening stance on the nuclear issue suggests an attempt to explore the feasibility of negotiations. Currently, Iran is not in a strategic offensive posture.
The real turning point: the complete bankruptcy of the extreme conflict narrative.
By combining the behavioral logic of both the US and Iran, the underlying logic of this round of oil price repricing becomes clear.
Looking back at the market highs in March and April this year: Trump made a tough statement, threatening to destroy key Iranian infrastructure. Driven by extreme panic, WTI crude oil futures prices once broke through $115 per barrel. Iran also took the opportunity to send retaliatory signals, threatening to increase its attacks on energy transport routes in the Persian Gulf. The pessimistic view that "oil prices will rise to $200" spread in the market.
However, the actual situation has deviated from extreme expectations: in the face of repeated provocations from Iran, the United States has been de-escalating the situation; when faced with military provocations, Iran has always held its ground and refused to launch a full-scale counterattack; both sides are using third-party channels to explore a path to a peaceful withdrawal.
Current Brent crude oil prices have fallen about 9% from their high a month ago, but are still more than 30% higher than pre-conflict levels. This price structure accurately reflects the market consensus: the most intense phase of the conflict has ended, but the premium brought about by geopolitical risks has not completely subsided. The core pricing logic of the market now is not "the complete resolution of the conflict," but rather that the worst-case scenario has been ruled out.
Outlook: Friction becomes the norm, and a price ceiling is established.
Looking ahead to the future trend of the crude oil market, and considering the game between the two sides, several clear judgments can be made:
The conflict ceiling has been locked.
The true bottom lines and demands of both the US and Iran have been revealed. Trump, constrained by the War Powers Act, low approval ratings, and the midterm elections, has accepted the reality of "limited objectives and a dignified exit." Iran, under long-term sanctions and external shocks, has maintained rationality and restraint, refusing to escalate the conflict. The mutual confirmation of each other's bottom lines significantly reduces the probability of a further full-scale escalation of the situation.
The process of implementing the agreement has been fraught with twists and turns.
Even if a preliminary framework for a ceasefire is reached, its implementation will be repeatedly stalled. Just after news emerged from the US that an agreement was nearing completion, the US military launched strikes against southern Iran under the pretext of "self-defense," prompting Iran to issue a stern warning, and Brent crude oil prices briefly rebounded to the $100/barrel mark. This state of "negotiations and frictions" will likely become the norm for the coming months.
One-sided market trends are unlikely on both the supply and demand sides.
On the supply side: Even if the Strait of Hormuz fully reopens to navigation, the damaged Iranian oil fields and related facilities will not be able to return to pre-conflict production levels in the short term. On the demand side: The International Energy Agency (IEA) has confirmed that global crude oil demand in 2026 will decline slightly year-on-year, with high interest rates suppressing energy consumption in developed economies, coupled with the continued acceleration of renewable energy substitution. Considering the overall supply and demand situation, oil prices are unlikely to experience another unilateral surge, nor will they quickly return to pre-conflict lows.
Conclusion
The recent sharp decline in oil prices is essentially a shift in market narrative: from "all-out war and escalating conflict" to "continued localized friction with both sides willing to de-escalate." The ceasefire-related memorandums are not the root cause of the price drop, but merely evidence of the market's assessment.
What truly drives market repricing is the real intention behind the actions of both sides: on one side is the United States, which is bound by high oil prices, low public opinion, and election pressure, and is eager to find a way out; on the other side is Iran, which has weathered a period of internal turmoil, maintained restraint in the face of friction, and actively released goodwill for negotiations.
The peak of the current geopolitical conflict has passed, and the long-term post-conflict struggle will become the main theme of the market, with no new high point of conflict likely to occur.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
