US-Iran peace talks ease market volatility but uncertainty keeps oil prices hovering, complicating recovery efforts

United States President Donald Trump is touting relief at the pump as US gas prices begin to fall ahead of potential peace talks despite ongoing clashes in the Strait of Hormuz.

“GAS PRICES ARE COMING DOWN.” Trump wrote on Monday on his social media platform, Truth Social.

The average price of a gallon (3.78 litres) of petrol has fallen to $3.86, according to the American Automobile Association (AAA), which tracks daily fuel prices. That’s down from a mid-May peak of $4.48 and has declined since Trump announced the reopening of the Strait of Hormuz in mid-June. Prices remain well above the $2.98 per gallon recorded on February 28, when the United States and Israel first launched strikes on Iran.

A renewed diplomatic push between the US and Iran comes after several days of back-and-forth attacks following an Iranian strike on a cargo ship in the waterway, through which roughly a fifth of the world’s oil is normally exported

Uncertainty around the peace deal has weighed on oil supply chains, which could keep prices from falling further.

Oil prices increased by more than one percent on Monday following the latest attacks, but analysts suggest that the renewed peace talks kept prices from jumping higher.

“The declines came despite a turbulent week, as fresh attacks were traded between the US and Iran before both sides agreed to halt hostilities just in time Sunday, preventing what could have been a significant spike in oil prices,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a note. “…the situation remains anything but predictable.”

Earlier this month, analysts told Al Jazeera that, because of shutdowns and supply chain bottlenecks, even if the peace deal held, it would still take several months before prices fell back to pre-war levels – as the US Strategic Petroleum Reserve hit its lowest level since the Reagan administration.

“Hindsight is clear, but does nothing to change the unsustainable nature of the outage. Having consumed domestic commercial stocks and SPRs [Strategic Petroleum Reserve], the world is now drawing on US inventories to find balance, extending the timeline of recovery for inventories post-crisis,” analysts at EverCore ISI Research said in an analyst note published on Monday.

Despite the uncertainty around a stable ceasefire, companies are still loading tankers. For example, on Monday Saudi Aramco loaded a ship that can carry two million barrels after three comparable vessels did the same over the weekend, according to LSEG data.