Oil prices barely moved on August 5, 2026. One key price, called Brent, ticked slightly higher. Another, called WTI, edged slightly lower. Investors were waiting to see if a deal to reopen a critical shipping lane — the Strait of Hormuz — could come as soon as the next day. Reuters. BBC

Brent and WTI are just two names for the price of oil, set by trading on major exchanges. Think of them as the benchmark price tags that most of the world's oil is measured against. The Strait of Hormuz is a narrow strip of water between Iran and Oman. About one in every five barrels of oil the world consumes passes through it. When that lane is threatened, prices jump. When it looks safe, prices fall.

The day before, oil prices had crashed about 5%. Reports of progress toward ending the U.S.-Iran war pushed Brent below $80 a barrel for the first time in weeks. Reuters. U.S. Treasury Secretary Bessent told reporters a deal to reopen the strait could be agreed on Wednesday, with a real chance of an agreement that day. President Trump piled on the pressure, warning Iran would be "hit very hard" if the strait was not opened soon. BBC

The Strait of Hormuz has been the biggest source of swings in oil prices throughout the U.S.-Iran conflict, which entered its fifth month in July. Prices have lurched at every piece of news. Brent dropped 4.9% to $92.02 on July 26 when the two sides paused attacks, and spiked 9.6% to $83.30 on July 13 after fighting resumed. AP. AP. On May 6, Brent sank below $104, falling 7.8% to $101.27 from above $115, on hopes of a reopening. A Friday in April saw crude plunge more than 9% after Iran said it would fully reopen the waterway. AP. AP

Iran's approach to the strait has been unpredictable. Tehran announced restored control under strict military oversight on April 18, then promised a full reopening, then stopped two ships trying to leave the strait on July 31, which pushed prices higher. IRNA. Reuters. Iran's parliament speaker said in early July that passage would be free of charge for only 60 days and that Iran would not back down from its rights in the waterway. Iran's Revolutionary Guard, a powerful military force separate from the regular army, said on July 13 that Iran would "steadfastly maintain its sovereignty and control" over the strait. IRNA. IRNA

Iranian officials have treated control of the strait as a core national interest. Iran's deputy parliament speaker said in May that managing the Strait of Hormuz is "similar to nationalizing the oil industry" for Iran. IRNA

A temporary deal between Washington and Tehran in June 2026 had initially calmed fears about oil supply, leading analysts to lower their price forecasts. A late-June Reuters poll projected Brent to average $84.50 per barrel and WTI $79.49 per barrel for 2026. Reuters. The U.S. had already been softening the price impact by producing more oil at home and releasing oil from its Strategic Petroleum Reserve — a government emergency stockpile stored in underground salt caverns. Releasing that oil adds supply to the market, which tends to push prices down. Reuters

The International Energy Agency, which advises major economies on energy policy, added its own note of worry. Its head, Dr. Fatih Birol, questioned the reliability of Persian Gulf oil producers in late July. That suggested the market is concerned not just about short-term disruptions but also about whether these suppliers can be trusted over the long run. Shana

What this means in plain terms is that the market is treating this as an all-or-nothing moment. If a deal happens on Wednesday, the extra dollars that traders have been paying because of the risk of disruption get stripped out of the price. If it fails — especially with Trump threatening to hit Iran "very hard" — the risk of a major supply disruption comes roaring back. The price action over the past 48 hours already shows a market betting heavily on the deal going through. After Brent dropped below $80 on August 4, the flat August 5 session suggests sellers are running out of steam and buyers don't want to commit before an actual announcement. That standoff makes sense. Nobody wants to bet on falling prices right before a deal could collapse, or bet on rising prices right before a deal could succeed.

The important catch is that even a deal may not settle things for good. Iran's 60-day free-passage clock, the Revolutionary Guard's claims of sovereignty, and the July 31 ship-stopping all suggest that the risk of disruption in this waterway doesn't disappear just because a diplomatic agreement is signed. A deal makes a full closure less likely. It does not remove Iran's ability to single out and stop individual ships. For anyone managing risk, that difference is crucial. The fair price of oil after a deal is not the price from before the war. It is the pre-war price plus a smaller but still real risk premium, reflecting a strait controlled by a country whose promise of free passage comes with an expiration date and conditions.