Trump Signals Iran Deal to Reopen Strait of Hormuz, Ending Standoff Over 20% of Global Oil Supply

President Donald Trump announced Saturday that a peace agreement with Iran is “largely negotiated,” outlining a 60-day framework that would reopen the Strait of Hormuz and end a three-month standoff threatening approximately 20 million barrels per day of petroleum flows—roughly 20% of global oil consumption.

The proposed memorandum of understanding would require Iran to clear mines deployed in the Strait, while the United States would lift its naval blockade on Iranian ports and issue targeted Sanctions waivers, according to Axios. The framework represents a sharp pivot from the administration’s February 2026 military strikes, which triggered the closure of the world’s most critical energy chokepoint.

From Military Strikes to Negotiated Exit

The conflict began on 28 February 2026 with Operation Epic Fury, a coordinated U.S.-Israeli air campaign targeting Iranian nuclear facilities. Iran responded by mining the Strait and imposing a de facto blockade on Gulf oil exports. A fragile ceasefire took effect on 8 April, according to CNBC, though Trump described it as being “on massive life support” amid continued skirmishes.

Brent crude prices surged from an average of $64 per barrel in February to above $100 by mid-March, peaking at approximately $116 on 30 March 2026, per Grand View Research. OPEC crude output collapsed to approximately 21.6 million barrels per day in March—down nearly 7 million barrels from pre-crisis levels—as Gulf producers lost access to export routes.

Goldman Sachs warned in April that Brent could average above $100 throughout 2026 if the Strait remained largely closed for another month, with potential spikes to $120 in Q3 and $115 in Q4 under extended closure scenarios, according to OilPrice.com.

The Framework’s Terms and Tensions

The draft memorandum includes commitments from Iran to never pursue nuclear weapons, negotiate a suspension of uranium enrichment, and remove its stockpile of highly enriched uranium, according to Axios. The United States would negotiate lifting sanctions and unfreezing Iranian funds during the 60-day period, but implementation would occur only after final verification of Iranian compliance.

The sequencing represents a calculated compromise. Iran has proposed a phased approach that prioritizes ending the war declaration, lifting sanctions, and removing the blockade before addressing nuclear constraints—deferring the most contentious issue to later stages, CNN reported on 11 May. The U.S. framework appears to accept this structure while embedding nuclear commitments into the initial MOU.

Duration of the uranium enrichment moratorium remains contested. The administration has demanded a 20-year freeze, while Iran has proposed five years. White House Press Secretary Karoline Leavitt confirmed discussions about in-person talks but cautioned that “nothing is final until announced by the President or the White House,” per NBC News.

Economic Stakes Beyond Energy

The strait carries 27% of the world’s maritime crude oil and petroleum product trade, U.S. Energy Information Administration data shows. Asia bears the heaviest exposure: China received 37.7% of all oil exports passing through Hormuz, while India and China combined account for 44% of crude flows, according to the International Energy Agency.

Federal Reserve Bank of Dallas modeling indicates a one-quarter closure would reduce global real GDP growth by an annualized 2.9 percentage points in Q2 2026, with WTI prices rising to $98 per barrel. A two-quarter closure would push prices to $132, while three quarters could peak at $167, per the Dallas Fed in March.

The complete cessation of Gulf oil exports amounts to removing close to 20% of global oil supplies from the market, with cascading impacts across manufacturing, automotive, and energy-intensive industries. Gregory Brew, senior analyst on Iran at Eurasia Group, told CNN in early May that “the longer this goes on, the higher prices are going to get. There’s nothing that can replace Hormuz output.”

Verification and Enforcement Risks

The 60-day timeframe compresses verification timelines that typically span months in arms control agreements. Iran must clear mines from the Strait—a technically complex operation that could take weeks even under cooperative conditions—while the U.S. must coordinate sanctions waivers across multiple agencies and allied governments.

The framework’s enforcement mechanisms remain opaque. Previous Iran agreements, including the 2015 Joint Comprehensive Plan of Action, collapsed over disagreements about inspection access and sanctions snapback provisions. The current MOU defers implementation of sanctions relief until final verification, creating potential friction if Iran perceives delays as bad faith.

What to watch

Final terms on the uranium enrichment moratorium duration will signal whether both sides accept a temporary freeze or demand generational constraints. The timeline for mine clearance operations will determine how quickly oil flows can resume—technical assessments suggest 3-6 weeks under optimal conditions, but Iranian cooperation remains uncertain.

Oil Markets will respond to any official announcement within hours. Brent futures have traded in a volatile range since the April ceasefire, and a credible reopening timeline could trigger sharp downward moves as traders price in restored supply. Conversely, any breakdown in talks would likely push prices back toward the March peak of $116 per barrel.

Asian importers, particularly China and India, hold significant leverage. Both countries have maintained unofficial contacts with Iran throughout the conflict and could influence Tehran’s calculus by signaling willingness to resume purchases under sanctions waivers. Their response to the framework’s sanctions sequencing will indicate whether Iran can secure the economic relief it views as essential to any agreement.