Oil prices retreated sharply on Thursday after President Trump said he had canceled planned military strikes on Iran, a move traders interpreted as progress toward a negotiated end to the conflict. July West Texas Intermediate crude settled lower by 2.32 cents, or 2.58%, while July reformulated blendstock gasoline (RBOB) finished down 0.0085, or 0.27%.
Crude had been highly volatile earlier in the session as headlines escalated risks to Middle East supply. The later shift toward de-escalation more than offset bullish support tied to expected supply disruptions around the Strait of Hormuz and ongoing damage to Russian refining infrastructure.
Key takeaways
- Price move: July WTI crude fell 2.58% and July RBOB gasoline declined 0.27%.
- Catalyst: Trump said planned military strikes on Iran were canceled, citing “discussions” with Iranian leadership and signaling a possible near-term peace arrangement.
- What changed: The market reversed an earlier rally fueled by threats to hit Iranian targets and seize Kharg Island.
- Implication: Traders are treating geopolitics headlines as a near-term driver for risk pricing in crude and refined products.
What drove the move
Crude and gasoline prices swung repeatedly on Thursday after a series of official statements on military posture toward Iran. Earlier in the day, Trump indicated the U.S. would continue attacks if Iran did not agree to an interim peace framework. That timeline quickened following reports of strikes on Iranian targets on Wednesday and retaliatory actions by Iran against U.S. bases in the region.
Markets later shifted when Trump said planned military strikes had been canceled, pointing to ongoing discussions. He also indicated that the timing and location of a negotiated end to the war would be announced shortly, while adding that the U.S. naval blockade of the Strait of Hormuz would remain in place until an arrangement is finalized. The combination of “canceled strikes” and “continued blockade” left traders balancing immediate de-escalation against ongoing shipping constraints.
Market reaction and why gasoline lagged
Despite the sharp drop in crude, gasoline fell more modestly. That pattern is consistent with traders focusing first on the direction of crude risk premiums, then calibrating refined product expectations based on demand and throughput signals. Thursday’s crude selloff reflected the market repricing the probability of near-term supply disruption from heightened military action.
The broader day’s narrative included two additional pressures that limited gains even before the later reversal: reports pointing to rising volumes of oil moving through the Strait of Hormuz and indications of weak Chinese demand. Trump said U.S. support helped “more than 200 commercial ships” pass through the strait, with “more than 100 million barrels of oil” reaching market. Separately, data cited in the reporting pointed to China’s May crude imports dropping to about 7.8 million barrels per day, the lowest in more than eight years—an especially bearish datapoint given China’s role as the world’s largest crude importer.
Bigger picture: supply tightness versus potential normalization
While Thursday’s headlines drove near-term price action, the underlying supply-demand backdrop remains mixed. On the bullish side, the market has continued to draw support from disrupted production and constrained inventories. The report noted that Ukrainian drone attacks have targeted Russian oil infrastructure, and Bloomberg said Russia banned jet fuel exports after refinery attacks reached a record high in May. It also cited declining Russian refinery runs and ongoing effects of sanctions on Russian oil exports.
In addition, the International Energy Agency said that global oil inventories fell by about 4 million barrels per day in March and April and warned that the market would remain “severely undersupplied” until October even if the conflict ends quickly. Goldman Sachs’ estimate cited in the report suggested Persian Gulf output has been curtailed and that the disruption has drawn down large volumes from global stocks, potentially accelerating inventory drawdowns.
But there are also factors that can cap rallies. OPEC delegates indicated on May 14 that the group plans to continue quota increases, aiming to complete the return of previously halted production by the end of September. The reporting also referenced a 40-year low for OPEC May crude production and mentioned that any planned increases could be complicated if Middle East producers face cuts linked to the war.
U.S. production and inventory signals investors watch
The selloff came alongside U.S. supply and stock signals that traders monitor for clues about near-term balance. The report cited Wednesday’s EIA data showing U.S. crude oil inventories as of June 5 were 5.3% below the seasonal five-year average, while gasoline and distillate inventories were also below their seasonal benchmarks. It also noted that U.S. crude production rose 0.7% week over week to 13.799 million barrels per day, though it remained slightly below the record high of 13.862 million barrels per day from early November.
On the activity front, Baker Hughes data referenced in the report showed U.S. active oil rigs rose by 2 to 431 in the week ended June 5, an 11-month high and well above a recent low late last year.
Looking ahead, traders are likely to focus on whether the “canceled strikes” language translates into a sustained de-escalation path, or whether subsequent U.S.-Iran developments reintroduce risk premia. In the near term, markets will also weigh continued inventory and rig data, as well as any updates on OPEC+ production plans and further evidence on Middle East shipping and China’s crude demand trajectory.
