WTI, the US crude oil benchmark, declined by approximately 2.49% and is set to end the week with losses exceeding 7.39%, driven by growing speculation that the United States and Iran may reach an agreement to end the conflict in the Middle East [1]. Market sentiment improved as hopes for the reopening of the Strait of Hormuz increased, despite overnight exchanges of fire between the US and Iran [1][2]. Washington is awaiting Tehran’s response to a 14-point memorandum, with US State Secretary Marco Rubio indicating a reply is expected on Friday, May 8 [1].
Analysts cited by Reuters noted that oil trading is primarily focused on headlines related to Iran’s conflict and the potential reopening of the Strait of Hormuz, which could push WTI prices lower and ease inflationary pressures [1]. Baker Hughes reported an increase in oil and natural gas rigs for the third consecutive week, with the rig count rising by one to 548 as of May 8; however, this figure remains down by 30 rigs, or 5%, compared to the same period last year [1].
The US Dollar Index (DXY) weakened, falling toward the 97.90 region, as risk sentiment improved and safe-haven demand eased following reports that the US and Iran are working to preserve a fragile ceasefire framework despite renewed military incidents [2]. US President Donald Trump stated that negotiations remain active and both sides are attempting to avoid broader escalation around the Strait of Hormuz, which contributed to the softer geopolitical tone and reduced demand for the US Dollar [2]. Oil prices trimmed part of their gains, alleviating fears of another major inflation shock [2].
The latest US Nonfarm Payrolls report showed the US economy added 115,000 jobs in April, surpassing market expectations of around 60,000 [1][2]. The Unemployment Rate remained stable at 4.3% [2]. However, US Consumer Sentiment, as measured by the University of Michigan, deteriorated to its all-time low, reflecting household concerns about high gasoline prices and inflation [1][2]. Treasury yields also decreased, further contributing to the softer tone of the USD [2].
Technical analysis indicates WTI trades at $92.47, maintaining a constructive near-term bias above key moving averages and trend-line supports, suggesting the broader uptrend is intact despite the recent pullback [1]. Momentum is neutral, with the 14-day Relative Strength Index easing to about 48, hinting at consolidation [1].
CONCLUSION
WTI oil prices are under pressure due to optimism surrounding a potential US-Iran deal and hopes for the reopening of the Strait of Hormuz, which could ease inflationary concerns. The US Dollar weakened as risk sentiment improved and oil prices trimmed gains, while strong US jobs data contrasted with deteriorating consumer sentiment. Market participants remain focused on geopolitical developments and their impact on oil and currency markets.