Trading WTI Crude: Traders optimistic on a deal, but can crude break $90?

Reports suggest discussions are centred around a potential 60-day ceasefire extension, which could pave the way for the gradual reopening of the Strait of Hormuz and allow for a partial restoration of Iranian and Gulf energy exports. During that 60-day window, negotiations around Iran’s nuclear capabilities would continue.

For markets, there are effectively two separate issues being priced.

1) Reopening the Strait of Hormuz remains critical for global energy markets

The first issue is the operational reopening of the Strait of Hormuz and the normalisation of shipping logistics through one of the world’s most important energy corridors.

Before the conflict, the Strait typically saw around 120 to 140 commercial vessels move both east and west through the passage each day. At present, flows remain severely constrained, with the last reading above 10 vessels making the trip through the Strait on a day set back on 2 May.

While it seems unlikely that shipping volumes immediately return to pre-conflict levels, there is clearly a strong willingness from shipping companies and producers to restore operations as quickly as conditions allow.

A gradual reopening process, combined with improving security conditions, would likely help restore confidence across energy supply chains and reduce some of the extreme geopolitical risk premium currently embedded in crude prices.

2) A 60-day ceasefire may be too aggressive for a full nuclear agreement

The second issue is whether a 60-day ceasefire extension provides enough time for a meaningful nuclear agreement to be reached.

By historical standards, that timetable appears highly aggressive.

Negotiations involving uranium enrichment, inspections, sanctions relief, verification procedures and regional security arrangements have historically taken many months, if not years, to resolve.

As a result, there is a realistic possibility that any initial ceasefire agreement may ultimately need to be extended further if negotiations are progressing constructively.

That point may become increasingly important for financial markets.

A rolling extension of the ceasefire would likely reinforce confidence that both sides are moving toward a more durable long-term resolution, particularly if shipping flows through Hormuz continue improving during the process.

Crude prices retreat as markets price improving geopolitical conditions

Crude prices have already reacted sharply to expectations that some form of framework agreement may be approaching.

WTI spot crude has fallen from around $108 to below $93, although prices have seen periods of retracement higher following reports today of additional US military strikes framed as self-defence actions.

Markets remain highly sensitive to headline risk, and intraday volatility continues to reflect the uncertain geopolitical backdrop.

From a technical perspective, traders are closely watching whether crude can fill the gap created from Monday’s open around $98.60. At the same time, there remains uncertainty around whether sellers can force a sustained break below $92 and potentially retest the 17 April lows near $84.

At present, the market continues to trade as a highly reactive two-way environment, although the aggregated flow of news has increasingly been viewed as constructive.

The crude futures curve offers insight into where traders see oil prices by year-end

One of the more interesting developments can be seen in the crude futures curve, particularly the December 2026 WTI crude futures contract (CLZ2026 on TradingView).

The deferred futures contract provides a useful market-based indication of where traders collectively expect crude prices to settle toward year-end, assuming:
• Some degree of US-Iran de-escalation
• Improved flows through the Strait of Hormuz
• A gradual recovery in Gulf production and exports

Importantly, a meaningful geopolitical risk premium still appears embedded in the curve.

Prior to the conflict, the December 2026 contract was trading closer to $64. The contract is currently trading around $79.24, which suggests the market still expects ongoing supply uncertainty and elevated geopolitical risk, even under a more constructive diplomatic scenario.

That pricing also likely reflects expectations that:
• Some Gulf production capacity has been materially disrupted
• Energy infrastructure and logistics may take time to normalise
• Production recovery may occur gradually rather than immediately

As a result, markets are unlikely to expect Brent and WTI crude to quickly return to pre-conflict pricing levels.

At current pricing, the December 2026 contract arguably provides a realistic reflection of where the market sees the longer-term “fair value” of crude based on evolving supply-demand dynamics.

Importantly for broader financial markets, if spot crude ultimately trends toward those deferred pricing levels over time, it would likely be viewed as a constructive development for global risk assets and broader equity market sentiment.