MW Global oil prices drop below $105 a barrel, airline stocks surge on hopes the U.S.-Iran war will soon end

By Isabel Wang and Myra P. Saefong

The EIA reported a significant drop in U.S. crude oil inventories, but oil prices mainly reacted to the potential de-escalation in Iran

President Donald Trump suggested Wednesday that a deal with Iran is close, while oil prices pulled back.

Oil futures were extending their declines on Wednesday afternoon after President Donald Trump suggested that a deal with Iran was close, raising hopes for a resolution to the months-long stalemate in the Middle East.

West Texas Intermediate crude saw its most-active July contract (CL.1) (CLN26) fall 6% to $97.88 a barrel, while Brent crude futures for July delivery (BRN00) (BRNN26) were off 5.9% at $104.65 a barrel, according to FactSet data.

The U.S. oil benchmark's drop below $100 a barrel also fueled a relief rally for U.S. airline stocks, with shares of Delta Air Lines $(DAL)$ gaining nearly 10% and United Airlines' $(UAL)$ stock up 9.7%. The U.S. Global Jets exchange-traded fund JETS was rising 6.3% on Wednesday afternoon, on pace for its best day since Aug. 12, according to Dow Jones Market Data.

Airlines have raised fares and cut flights as jet-fuel prices skyrocketed after the U.S. and Israel launched their war on Iran in late February. The closure of the Strait of Hormuz, a key waterway for nearly 20% of the world's oil supply, has also fueled concerns about a potential jet-fuel shortage ahead of the peak summer travel season.

See: Airfares are up 21% since last year. Here are the summer destinations where you can still get a deal.

The president, before speaking to U.S. Coast Guard graduates on Wednesday, told reporters in brief remarks that the U.S. and Iran were in the "final stages" of talks to end the conflict. Trump gave no time frame but delivered a warning to Tehran that either there will be a deal, or "we're going to do some things that are a little bit nasty."

Oil prices were also reacting to reports that a new round of negotiations between the U.S. and Iran will be held in Pakistan. Saudi Arabian news channels reported on Wednesday that "work is underway to finalize the text of an agreement between Washington and Tehran," adding that "the final version of the agreement between America and Iran may be announced within hours."

Citing sources familiar with the matter, they also reported that "a new round of negotiations between the U.S. and Iran will be held in Islamabad after the Hajj season." The Hajj pilgrimage to Mecca takes place May 25-27 this year.

On Tuesday, two Chinese tankers carrying crude oil traversed the Strait of Hormuz. A South Korean vessel was also moving through it, according to a Reuters report.

Phil Flynn, senior market analyst at the Price Futures Group, said the tankers moving through the strait offer "a relief valve to the market we did not have before" and noted that another round of peace talks has reportedly been scheduled.

"The odds of the U.S. attacking Iran again have gone down significantly," Flynn told MarketWatch on Wednesday morning.

The Energy Information Administration on Wednesday reported a significant drop in U.S. crude oil inventories for the week ending May 15.

Crude stockpiles decreased by nearly 7.9 million barrels. That was a fourth straight weekly decline and substantially surpasses market expectations of a reduction of around 2.5 million barrels.

"Headlines suggest that the war is coming to an end, and that has brought some aggressive selling into oil markets," even as U.S. crude inventories continue to draw down, said Denton Cinquegrana, chief oil analyst at Dow Jones Energy. (Dow Jones Energy is a unit of Dow Jones, the publisher of MarketWatch.)

Robert Schroeder, Claudia Assis and Nora Redmond contributed.

-Isabel Wang -Myra P. Saefong

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 20, 2026 13:30 ET (17:30 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.