Oil prices settled mixed on August 5, 2026, with Brent crude closing slightly higher and the U.S. WTI contract edging lower. Investors were weighing the prospect of a Strait of Hormuz reopening agreement that U.S. Treasury Secretary Bessent said could come as soon as the following day. Reuters. BBC

Brent and WTI are the two benchmark oil prices that most of the world's crude trades against — Brent from the North Sea, WTI (West Texas Intermediate) from U.S. fields. The Strait of Hormuz is a narrow shipping lane between Iran and Oman through which roughly a fifth of global oil demand passes.

The session followed a sharp 5% sell-off on August 4, when reports of progress toward ending the U.S.-Iran war drove Brent below $80 a barrel for the first time in weeks. Reuters. 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 reinforced the pressure, warning Iran would be "hit very hard" if the strait was not opened soon. BBC

The Strait of Hormuz has been the single most volatile variable in crude markets throughout the U.S.-Iran conflict, which entered its fifth month in July. Prices have swung at every signal. 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 following renewed fighting. 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 posture toward the strait has been inconsistent. Tehran announced restored control under strict military oversight on April 18, then pledged a full reopening, then stopped two vessels attempting to exit the strait on July 31, pushing 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. The IRGC — Iran's Islamic Revolutionary Guard Corps, a powerful military branch that operates independently of the regular army — followed with a statement on July 13 asserting Iran would "steadfastly maintain its sovereignty and control" over the strait. IRNA. IRNA

Iranian officials have framed 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

The June 2026 interim deal between Washington and Tehran, which initially eased supply fears, led analysts to dial down 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 dampening price impact by boosting domestic output and releasing Strategic Petroleum Reserve crude. Reuters

The Strategic Petroleum Reserve, or SPR, is the U.S. government's emergency oil stockpile, stored in underground salt caverns along the Gulf Coast. Releasing crude from it adds supply to the market, which tends to push prices down.

The IEA added its own layer of concern. Dr. Fatih Birol questioned the reliability of Persian Gulf producers as suppliers in late July, a signal that the market is not just pricing the physical disruption risk but also longer-term questions about energy security. Shana

The IEA, or International Energy Agency, advises industrialized nations on energy policy. When its head publicly questions whether Gulf producers can be relied upon, it carries weight.

The broader context here is that the market is effectively pricing a binary outcome. A Wednesday deal suppresses the risk premium — the extra dollars per barrel that traders pay because of the chance of disruption — embedded in front-month contracts. A failure, particularly given Trump's "hit very hard" rhetoric, reintroduces the tail risk of supply disruption from a waterway carrying roughly a fifth of global oil demand. The price action over the past 48 hours already reflects a market leaning heavily toward the deal scenario. After Brent's break below $80 on August 4, the muted August 5 session suggests sellers are largely exhausted and buyers are reluctant to step in ahead of a concrete announcement. That stalemate is rational. Nobody wants to be short — betting on falling prices — into a failed negotiation, or long — betting on rising prices — into a confirmed reopening.

The structural caveat worth noting is that even a deal may not be a clean resolution. Iran's 60-day free-passage window, the IRGC's sovereignty language, and the July 31 vessel interdiction all point to a waterway where operational risk persists regardless of diplomatic agreements. A reopening of the strait does not eliminate Iran's capacity to selectively interdict traffic. It narrows the probability of a full closure. For traders and risk managers, that distinction matters. The fair value of Brent after a deal is not the pre-war price. It is the pre-war price plus a persistent, if reduced, geopolitical risk premium that reflects a strait controlled by a party whose commitment to free passage is time-limited and conditional.