Oil Markets Whipsaw on Iran Deal Hopes as U.S. Exports Hit Records

Oil prices fell sharply Wednesday on optimism that the U.S. and Iran were close to an agreement to end the conflict that has caused the largest energy supply disruption in history, with international benchmark Brent crude futures tumbling nearly 8% to close at $101.27 per barrel and U.S. West Texas Intermediate futures falling about 7% to close at $95.08 .

Two U.S. officials and two other sources briefed on the issue told Axios that the White House believes it is nearing a one-page, 14-point memorandum of understanding to end the war and establish a framework for more detailed nuclear talks . A Pakistani source involved in the peace efforts confirmed to Reuters that the U.S. and Iran are closing in on a one-page agreement to end their war, with Washington expecting Tehran's responses on a number of critical points within the next 48 hours .

The dramatic price drop came after U.S. crude oil plunged by as much as 15%, to $88 per barrel, and international Brent crude oil fell as much as 11%, to $96 per barrel during Wednesday's session . According to market data, WTI crude now stands at $71.50 per barrel, while Brent trades at $75.20 per barrel as of early Thursday, though oil prices edged higher in early Asian trade on Thursday, rebounding from the previous session's steep selloff, as investors reassessed the chances of a near-term U.S.-Iran peace agreement .

U.S. Fuel Exports Shatter Records Amid Global Scramble

While peace talks dominated headlines, the United States last week exported a record-high of oil products, a category that includes gasoline, jet fuel, and diesel, of nearly 8.2 million barrels a day, according to the Energy Information Administration . Bloomberg reporting noted that diesel exports led the increase and reached an all-time high .

Countries are now competing for refined products, including diesel, jet fuel, and gasoline as shipping disruptions around Hormuz destabilize downstream fuel systems tied to transportation, aviation, and industrial activity, with Europe's growing jet fuel shortages and rising diesel demand across Asia increasingly pulling more U.S. barrels into international markets .

The U.S. has effectively become the balancing supplier for global fuel markets while Gulf exports remain disrupted, giving Washington enormous pricing and supply influence even as the broader conflict continues destabilizing energy flows worldwide—but that is starting to create a domestic political problem, as record export volumes help stabilize global markets but also tighten domestic supply balances and push American fuel prices higher .

The national average hit $4.536 as of Wednesday, a rise of about 5¢ from Tuesday's average of $4.483, the AAA said . The national average price of a gallon of gas reached $4.54 on Wednesday, up from $4.23 a week ago and around $3 per gallon at the start of the war .

Plastic Shortage Hits Asia as Petrochemical Crisis Deepens

Beyond fuel, the Iran conflict has triggered what the Financial Times described as a "plastic shock" hitting Asia. Asia's oil crisis is quickly worsening into a full-blown material shortage, as falling stockpiles of plastics threaten industries as far apart as food production and medical equipment .

The region imports around 70% of its supply of naphtha, a petrochemical feedstock used to produce polymers like polyethylene (PE) and polyethylene terephthalate (PET), from the Middle East, and these polymers are critical inputs for everyday products like food packaging, cosmetic containers, plastic bags, and medical consumables, all of which have skyrocketed in price since the Iran war began .

Jesse Tijerina, executive director of chemical consulting at S&P Global Energy, said variable costs to make polyethylene in Asia have doubled since the beginning of the war, and prices for polyethylene have increased 40–50% . According to ICIS, a commodities market intelligence platform, prices for plastic resins in Asia have risen as much as 59% to record highs since late February, when the United States and Israel first launched airstrikes against Iran .

For the healthcare industry, the shortage of polypropylene and PVC limits the availability of syringes, IV bags and sterile packaging, and as a result, what begins as a petrochemical shortage becomes a public health risk, particularly in countries with already stretched healthcare systems like India, Indonesia and the Philippines , according to supply chain expert Li Dong from Singapore's Nanyang Technological University.

Data Centers Drive Natural Gas Demand Surge

While oil markets gyrate on geopolitical developments, a quieter but equally significant energy story is unfolding in the power sector. Rapid growth in artificial intelligence (AI) data center power demand is driving a resurgence in fossil fuel investment, highlighted by the 2026 approval of massive natural gas projects in Texas and Pennsylvania .

While renewable energy continues to dominate total planned capacity, there has been an increase in natural gas planned capacity from 11.1 percent in 2024 to 18.1 percent in 2026, with planned non-renewable additions surging by 71 percent from 2025–2026, while renewable growth flattened to just 2 percent over the same period .

Driven by data centre investments, the capital expenditure of five large technology companies surged to more than $400 billion in 2025 and is set to increase by a further 75% in 2026 , according to the International Energy Agency. Constrained by slow grid connections, data centre developers are also advancing a large number of projects with onsite natural gas-based power generation, largely in the United States .

According to market data, Henry Hub Natural Gas currently trades at $3.25/MMBtu, down 2.4%. Natural Gas Intel reported that physical natural gas prices retreated for Thursday delivery on Wednesday as a fading late-season cool shot and softer LNG flows outweighed pipeline maintenance that throttled back Rockies eastbound supply .

Market Volatility Reflects Deeper Uncertainty

MarketWatch reported that oil contracts worth $1.7 billion changed hands in the hour before an Axios report sent oil prices lower Wednesday, with some experts calling the spike in activity suspicious . The unusual trading pattern underscores the hair-trigger nature of energy markets as traders position for potential peace breakthroughs or renewed conflict.

Warren Patterson, head of commodities strategy at Dutch bank ING, said in a research note that "a deal that normalises oil flows through the Strait of Hormuz is crucial," noting that "roughly 13 mb/d of disrupted supply is being largely offset by inventory, which is clearly declining rapidly" .

The Strait of Hormuz closure has resulted in a drawdown in global oil and fuel inventories as refineries try to offset production shortfalls, with U.S. crude oil inventories falling for a third week while gasoline and distillate stocks also declined—crude stocks fell by 8.1 million barrels in the week ended May 1, gasoline inventories were down by 6.1 million barrels from a week earlier and distillate inventories fell by 4.6 million barrels , according to American Petroleum Institute figures cited by market sources.

The whipsaw price action reflects the fundamental tension in energy markets: hope for diplomatic resolution colliding with the reality that even if peace comes, the full reopening of the waterway is expected to ease the pressure on oil markets, though the industry and analysts have said that it would take a while before normal market activity is resumed .