May 21 : 2026 (Navroze Bureau) : Global oil prices rebounded on Thursday after two consecutive sessions of decline, as uncertainty surrounding a possible peace agreement between the United States and Iran renewed fears over supply disruptions and tightening global inventories.
Brent crude and US West Texas Intermediate (WTI) futures both moved higher during early trading, recovering part of the sharp losses recorded earlier this week. Market analysts said investors remain deeply cautious because geopolitical risks in the Middle East continue to threaten global energy supply chains.
The rebound followed mixed signals regarding ongoing negotiations between Washington and Tehran. Although US President Donald Trump recently claimed talks with Iran were in their “final stages,” traders remain uncertain about whether a formal peace agreement will actually materialize.
Oil markets had initially dropped sharply after hopes emerged that a diplomatic breakthrough could ease tensions in the Gulf region and potentially reopen the strategically vital Strait of Hormuz. However, investors quickly turned cautious again as no official settlement was announced and regional risks remained unresolved.
Analysts noted that the oil market is currently extremely sensitive to geopolitical headlines involving Iran. Even small developments linked to negotiations, sanctions, military threats, or shipping activity are triggering major price fluctuations across global energy markets.
One of the biggest concerns remains the Strait of Hormuz, a critical maritime route through which nearly one-fifth of global oil and gas supplies typically pass. Although active fighting in the region has reduced since the April ceasefire, restrictions on shipping traffic and ongoing tensions continue affecting energy transportation.
Iran recently announced the formation of a new “Persian Gulf Strait Authority” and introduced tighter controls over maritime movement in the region, increasing uncertainty regarding future oil flows.
At the same time, fresh data showing major declines in US oil inventories provided additional support to crude prices. The US Energy Information Administration reported a much larger-than-expected drop in commercial crude stockpiles, intensifying concerns over tightening global supply conditions.
According to official figures, US commercial crude inventories fell by around 7.9 million barrels last week, significantly higher than analysts’ expectations of a roughly 2.9 million-barrel decline. Gasoline inventories also declined, reflecting strong fuel demand and supply pressure.
Additionally, the United States reportedly carried out its biggest-ever withdrawal from the Strategic Petroleum Reserve, releasing nearly 10 million barrels in a single week. Experts warned that continued drawdowns from emergency reserves may not be sustainable over the long term.
Energy analysts said global stockpiles are being depleted rapidly due to ongoing supply disruptions and logistical challenges caused by the Middle East conflict. Some experts believe worldwide crude inventories could soon fall below seasonal averages seen over the past five years.
“The drawdown in oil inventories will make it difficult for oil prices to remain low,” energy researcher Mingyu Gao told Reuters.
Market volatility has also been amplified by uncertainty regarding the timeline for restoring normal shipping through Hormuz. Although some tanker traffic has resumed, vessel movement remains far below normal levels seen before the conflict intensified.
Oil traders are now closely monitoring diplomatic developments between the United States and Iran because any confirmed peace agreement could significantly reduce supply fears and potentially lower prices again. However, failure of negotiations could trigger another sharp rally in crude prices.
The rebound in oil prices has broader implications for global financial markets and inflation trends. Higher crude prices can increase fuel costs, transportation expenses, and manufacturing input costs worldwide, placing pressure on economies already dealing with inflation concerns.
Countries heavily dependent on energy imports, including India, remain especially vulnerable to oil price volatility. Rising crude prices can weaken currencies, increase trade deficits, and impact consumer fuel prices.
Meanwhile, airline stocks and travel-related sectors, which had rallied after earlier oil price declines, remained volatile as investors reassessed the uncertain geopolitical situation.
Analysts expect oil markets to remain highly volatile in the coming weeks as traders respond rapidly to diplomatic updates, inventory data, shipping activity, and geopolitical developments involving Iran and the Gulf region.
For now, uncertainty over a final peace agreement and fears of tightening inventories continue supporting oil prices despite hopes that diplomacy could eventually stabilize global energy markets.