Something broke in the energy tape this week, and it happened fast. On Wednesday, May 6, Brent crude tumbled nearly 8% in a single session to close at $101.27 a barrel. WTI fell roughly 7% to $95.08. That is not a normal pullback. That is a market repricing a geopolitical assumption it has been sitting on for more than two months.

The trigger: reports that the White House believes it is closing in on a one-page, 14-point memorandum of understanding with Iran to formally end the war and open a 30-day window for detailed nuclear negotiations. Two U.S. officials and sources briefed on the matter told Axios the deal would involve Iran committing to a moratorium on nuclear enrichment, the U.S. lifting sanctions and releasing billions in frozen Iranian funds, and both sides unwinding restrictions on transit through the Strait of Hormuz. That last piece is the one the oil market cares about. Everything else is diplomacy. Hormuz is supply.

About 20% of the world’s crude and liquefied natural gas flowed through Hormuz before the war started on February 28. Goldman Sachs has estimated that exports through the chokepoint fell to roughly 4% of normal levels during the conflict. That is not a disruption. That is a near-total shutdown of one of the most important energy arteries on the planet.

What’s interesting is how fast the market moved to price in a deal that has not actually been signed.

Here is where it gets more complicated. The gap between the two sides on the core issues is still wide. Iran initially proposed a 5-year moratorium on enrichment. The U.S. demanded 20. The current landing zone being discussed sits somewhere between 12 and 15 years, per sources cited by Axios. Iran, meanwhile, has maintained that at this stage it is not negotiating its nuclear program at all — only the terms to end the war and reopen Hormuz. Iran’s Foreign Ministry has said any nuclear discussions would come in a second phase, after the shooting stops and the blockades lift. Washington has not fully accepted that sequencing, even as Rubio’s public posture shifted noticeably toward an MOU framework this week.

The IEA’s latest monthly update flagged that oil inventories globally are depleting at a record pace as Hormuz stays closed. UBS estimates total global oil stocks could fall to near all-time lows of 7.6 billion barrels by end of May if demand holds steady. Goldman separately warned that refined product buffers, particularly naphtha, LPG, and jet fuel, are being drawn down rapidly. Chevron’s CEO flagged fuel shortages as a real concern in specific regions. The inventory problem does not go away the day a memo gets signed.

So you have a headline-driven selloff sitting on top of a genuine supply crisis that has not been resolved.

The honest framing here is that energy is now a binary trade, not an analytical one. If the MOU gets signed and Hormuz begins a gradual reopening during the 30-day negotiation window, crude has room to fall further from current levels. The war premium built into the $95–$112 range does not belong there in a normalized supply environment. But if talks collapse again — and they have collapsed before, more than once — prices snap back hard. Trump himself said on the day of the selloff that it was “perhaps a big assumption” to think Iran would accept the deal, and threatened to resume strikes if it did not.

That is not the language of someone who thinks the finish line is in sight.

Markets are doing what markets do: pricing the best plausible outcome before the ink dries. Whether the MOU becomes a real agreement, whether the 30-day window produces anything on nuclear constraints, whether Iran holds to a Hormuz reopening — none of that is settled. What is settled is that the inventory clock is running, and the longer this drags out, the harder the eventual rebalancing gets. Worth keeping an eye on.