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Iran responds to U.S. ceasefire proposal. What next for oil?

By Hillary Remy TheStreet

Updated May 10, 2026 9:23 PM

The answer investors have been waiting for arrived on May 10. Iran sent its response to the latest U.S. ceasefire proposal through mediator Pakistan. Within hours, President Donald Trump called it "totally unacceptable."

Oil markets, which had been pricing in peace hopes since May 7, now face a more complicated picture.

What Iran's response to the US ceasefire proposal actually said

Iran's state news agency IRNA confirmed that the response was transmitted via Pakistani mediators on May 10. The proposal focuses on ending hostilities across the region, including in Lebanon, and ensuring maritime security in the Gulf and the Strait of Hormuz, according to Al Jazeera.

"Our response focuses on ending the war throughout the region, especially in Lebanon, and resolving differences with Washington," an official Iranian source told Al Jazeera. The source said Tehran's response also covered "negotiations regarding the Strait of Hormuz, the nuclear programme, and the lifting of sanctions," and described the response as "realistic and positive," adding that "Washington's positive response to our response will move the negotiations forward quickly."

The president's reaction was immediate. "I have just read the response from Iran's so-called 'Representatives.' I don't like it---Totally unacceptable!" He wrote on Truth Social.

The Strait of Hormuz and why it remains the central issue for oil markets

The Strait of Hormuz sits at the heart of every negotiation, every market move, and every economic calculation tied to this conflict. Roughly 20% of global seaborne crude oil passes through the narrow waterway, according to OilPrice.com. Since Iran effectively closed it in February, global oil supply chains have been under sustained pressure.

The human cost is also significant. Approximately 20,000 seafarers remain stranded on some 2,000 vessels in the Strait, according to the International Maritime Organization. The IMO has described the situation as having "no precedent in the modern age."

Iran's response explicitly addresses Hormuz as a negotiating point rather than an immediate concession. That means the Strait remains closed during any negotiating period, and oil markets will continue pricing in the supply disruption until a concrete reopening agreement is reached and verified.

Oil price volatility May 3 to 8 shows how sensitive markets are to every headline

The past week offered one of the clearest illustrations yet of how directly the Iran-U.S. negotiations are driving crude prices. WTI crude swung between a high of $107.46 and a low of $88.66 in a single week before stabilizing near $97 a barrel, according to OilPrice.com. That is a nearly $19 range in five trading sessions.

When violence flared in the Strait on May 4 and 5, Brent crude surged nearly 6% to $114.44 a barrel, according to Al Jazeera. When peace signals emerged on May 7, WTI plunged nearly 15% intraday, its largest single-day decline since the COVID-19 market collapse, OilPrice.com confirmed. On May 8, Brent closed at $101.29 per barrel and WTI settled at $95.42, with both benchmarks posting weekly losses of more than 6% as markets leaned into deal optimism.

More Oil and Gas:

"The risk of a proposed U.S. peace deal breaking down will likely keep oil markets volatile," ANZ Research wrote in a note cited by CNBC. That assessment now looks prescient given Trump's rejection of Iran's May 10 response.

What Iran's response means for oil prices going forward

With Trump calling Iran's response unacceptable, the immediate path to de-escalation is narrower than it was 24 hours ago. Oil markets will now likely reprice the war premium higher until there is clearer evidence of meaningful progress.

The key variable remains the Strait. A temporary calm in the fighting without a clear Hormuz reopening agreement would ease the immediate panic factor but would not resolve the structural supply disruption. Analysts have warned that even if a deal is reached, prices may remain elevated for some time due to the backlog of unloaded cargo, damaged regional infrastructure, and the need to clear mines.

On the optimistic side, U.S. National Economic Council Director Kevin Hassett said on Fox News on May 10 that once the Strait is fully opened, "a gusher of oil" will be released into the market and bring prices down, according to CNN. That scenario would represent a significant relief for global consumers and central banks dealing with energy-driven inflation.

The economic impact of sustained elevated oil prices

The oil price story is not contained within energy markets. Higher oil prices increase transportation and production costs that filter through to consumer prices over time. Central banks building toward interest rate cuts now face a more complicated calculation. If energy-driven inflation persists, the timeline for rate relief extends, keeping financial conditions tighter for longer.

Consumer spending takes a hit too. Higher fuel costs reduce disposable income, particularly for lower and middle-income households spending a proportionally larger share of their budgets on energy. Airlines, shipping companies, and manufacturers with energy-intensive production all face margin pressure that tends to show up in earnings guidance before it appears in broader economic data.

The risk escalates if elevated oil prices persist for months rather than weeks. A sustained shock can become stagflationary, the worst-case combination of slower growth and rising prices, which leaves policymakers with no good options.

Key figures on the Iran ceasefire and oil market as of May 10, 2026:

Iran's response delivered: May 10, via Pakistani mediators, covering Hormuz, nuclear programme, sanctions lifting, and regional ceasefire, according to Al Jazeera
Trump's reaction: called Iran's response "totally unacceptable," CBS News reported
Brent crude on May 8 close: $101.29 per barrel; WTI at $95.42; both down more than 6% on peace hopes, CNBC confirmed
WTI weekly range May 3 to 7: $88.66 to $107.46, OilPrice.com noted
Seafarers stranded in the Strait of Hormuz: approximately 20,000 on 2,000 vessels, confirmed by Jazeera
Share of global seaborne crude through Hormuz: approximately 20%, OilPrice.com reported
US position: Iran must halt uranium enrichment for at least 12 years and hand over its 440kg stock enriched to 60%, Al Jazeera noted

What investors and businesses should watch for from here

The next 48 to 72 hours are critical. Whether the U.S. and Iran return to the negotiating table or allow tensions to escalate again will determine whether oil's war premium expands or contracts from current levels.

Energy stocks may hold firm or extend gains if crude prices recover on renewed uncertainty. Airlines, logistics companies, and consumer-facing businesses will face continued pressure. Broader equities could see increased volatility if traders begin pricing in the scenario where talks break down entirely and the conflict intensifies.

The safest read right now is that oil risk remains elevated and the market will trade on every statement from Tehran, Washington, or Islamabad until there is a concrete, verifiable agreement on the Strait. A deal that addresses Hormuz shipping in a credible way would likely send crude sharply lower. A breakdown in talks would push it sharply higher. Between those two outcomes, the market remains at the mercy of headlines in a conflict where the gap between the two sides still looks significant.

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This story was originally published May 10, 2026 at 9:03 PM.