Oil Markets Face Critical Week as Iran Ceasefire Deadline Looms

A framework ceasefire proposal and a 48-hour ultimatum from President Trump are converging this week, creating what analysts call the most consequential moment for global energy markets since the Strait of Hormuz closed in early March.

Oil markets opened the week in a state of uneasy limbo. West Texas Intermediate crude traded near $112 per barrel on Monday morning while international benchmark Brent crude held around $109, both prices that would have been unthinkable six months ago. The reason is a collision of war, diplomacy, and a ticking clock: President Donald Trump has given Iran until Tuesday to reopen the Strait of Hormuz or face strikes on its power plants and bridges — even as mediators from Pakistan, Turkey, Saudi Arabia, and Egypt work to broker a 45-day ceasefire through a backchannel forum in Islamabad.

What the Strait of Hormuz Closure Means

The Strait of Hormuz is a narrow waterway between Iran and Oman that serves as the single most important chokepoint in the global oil trade. Roughly 20 million barrels of oil pass through it every day — about 20% of all seaborne crude worldwide. It also carries significant volumes of liquefied natural gas, or LNG, which is natural gas cooled to liquid form for shipping. When Iran effectively closed the Strait after the war began on February 28, it triggered what the head of the International Energy Agency called the “greatest global energy security challenge in history.”

The numbers tell the story. By the end of April, analysts at Rapidan Energy estimate nearly 1 billion barrels of oil and refined products will have been lost to the closure — roughly 600 million barrels of crude and 350 million barrels of refined fuels like gasoline, diesel, and jet fuel. To put that in context, the entire United States consumes about 20 million barrels per day, so the lost supply is equivalent to roughly 50 days of total American oil consumption.

The Ceasefire Framework and Trump’s Ultimatum

Over the weekend, both Washington and Tehran received what diplomats described as a framework ceasefire proposal. The plan, assembled by a coalition of regional mediators in Islamabad, outlines a potential 45-day pause in hostilities that could serve as a bridge to more permanent negotiations. However, Iran’s response was blunt: the regime called the accompanying U.S. 15-point plan “extremely ambitious, unusual and illogical and not acceptable,” according to state media.

Meanwhile, President Trump has set his own terms. In remarks on Friday, he gave Iran until Tuesday to begin reopening the Strait of Hormuz or face military strikes on Iranian infrastructure, including power plants and bridges. The dual-track dynamic — diplomacy through mediators and threats through the White House — has left traders uncertain about which direction the conflict will take this week.

There are small signs of progress. Over the past few days, a handful of vessels have passed through the Strait under what analysts describe as Iran’s “selective passage” policy — an Omani tanker, a French container ship, and a Japanese gas carrier. Ole Hvalbye, an analyst at SEB Research, noted that “the most important headline this weekend has been that some ships passed through the Strait,” suggesting Iran may be testing the waters for a partial reopening even as official negotiations stall.

What Consumers and Investors Are Feeling

The crisis has already hit American wallets. The national average gasoline price reached $4.10 per gallon as of Monday, according to AAA — the highest since August 2022 and up more than $1.10 from just five weeks ago, when a gallon of regular cost $2.98. The surge reflects the direct pass-through of higher crude prices to the pump, a process that typically takes two to three weeks.

In financial markets, the picture is more mixed. The S&P 500 rose 3.4% last week, the Dow Jones added nearly 3%, and the Nasdaq climbed 4.4%, with investors buoyed by a stronger-than-expected jobs report — the economy added 178,000 jobs in March, nearly three times the 60,000 forecast — and tentative hopes that a ceasefire could bring oil prices back down. But strategists urge caution. Saudi Arabia set its May pricing for Arab Light crude at a record $19.50 per barrel premium above the Oman/Dubai benchmark, a $17 increase from the prior month that signals the kingdom expects tight supply to persist.

The Emergency Response So Far

Governments and international bodies have not been standing still. The IEA coordinated the release of 400 million barrels from strategic petroleum reserves held by member nations — a record drawdown that covers roughly 20 days of supply from the Strait. Strategic reserves are government-held stockpiles of oil maintained specifically for emergencies like supply disruptions or wars. OPEC+, the cartel of oil-producing nations and their allies, also approved a 206,000 barrels-per-day production increase for May, though it remains unclear how that extra oil will reach global markets with the Strait still largely closed.

What to Watch

Tuesday’s Deadline: President Trump’s ultimatum for Iran to reopen the Strait of Hormuz expires Tuesday. If Iran does not comply, the administration has signaled strikes on Iranian infrastructure — a scenario that could send oil well above $120 per barrel and further disrupt already strained supply chains.

Ceasefire Negotiations: The Islamabad backchannel remains the most promising diplomatic avenue. Watch for any shift in Iran’s stance on the 15-point framework, particularly regarding the Strait. Even a partial reopening agreement could trigger a meaningful oil price decline.

Gasoline Prices: With crude above $110 and summer driving season approaching, AAA and GasBuddy analysts expect the national average could reach $4.50 or higher by May if the Strait remains closed. Consumers with variable budgets should plan for sustained higher fuel costs in the near term.