Oil prices sink on signs of U.S.-Iran deal

Crude oil prices dropped about $5 per barrel Sunday evening in the first major trading since the emergence of rough and tentative outlines of a deal to end the U.S.-Iran conflict.Why it matters: The throttling of the Strait of Hormuz is raising energy costs and weighing down economies worldwide — including the U.S., where average pump prices are about $1.50-per-gallon above pre-war levels.And the crisis is poised to worsen as global crude oil inventories are depleting at a record pace.The latest: Futures prices from the global benchmark Brent crude are back under $100 per barrel, trading around $98.76 Sunday evening, a 4.62% drop from Friday's close. Reality check: Even if an agreement that opens the Strait is reached — a process that could take days, per Axios' Barak Ravid — energy markets will remain disrupted for months.As of mid-May, the conflict was blocking the flow of around 14 million barrels of oil per day, according to the International Energy Agency.Saudi Arabia and the United Arab Emirates have increased the use of pipelines that bypass the Strait, but those added volumes don't come close to offsetting what normally travels through the narrow waterway.The waterway handles about a fourth of the global maritime oil and a fifth of the liquefied natural gas trade.And several Persian Gulf producers have dialed back production as storage space filled up, and that takes time to come back online.What they're saying: "Gas prices are currently falling but until we see an agreement signed & a significant amount of ships transit through the Strait, the national average price of gasoline will likely remain well above $4/gal," Patrick De Haan, head of petroleum analysis for the data and analysis firm GasBuddy, posted on X.The intrigue: Even if a deal emerges, it's not clear whether shippers will have confidence to quickly resume large-scale transport of crude oil and petroleum products.And some Asian markets with acute fuel needs take weeks to reach from the region.What we're watching: "[D]e-mining the Strait, evacuating trapped tankers and restarting production could take weeks to months," the research firm ClearView Energy Partners said in a client note Sunday."[R]epairing damaged facilities, restoring pre-war output levels, and restocking depleted inventories could take multiple calendar quarters to years," the research firm added in the note sent ahead of markets opening.Editor's note: This story has been corrected to show the strait handles about a fourth of the maritime oil trade (not a fifth).