Hopes for Iran Peace Deal Soar, Sending Oil Prices Tumbling

Reuters
By Yuval Rosenberg and Michael Rainey

Optimism surged Friday that an Iran peace deal may be close at hand after Tehran said it had fully reopened the Strait of Hormuz to commercial vessels and President Trump told Axios that he expects U.S. and Iranian negotiators will reach a deal "in the next day or two."

Here's what you should know as we head into the weekend.

Hopes for Iran Peace Deal Soar, Sending Oil Prices Tumbling

Oil prices tumbled on Friday after Iran declared that the Strait of Hormuz will be "completely open" during the ceasefire between Israel and Lebanon, even though there is some uncertainty about exactly how freely commercial ships are now moving through the critical energy chokepoint.

Futures contracts for May delivery of U.S. oil fell more than 10%, dropping below $85 per barrel. Contracts for Brent oil dropped 9%, to about $90. Contracts for both types of oil had recently soared over $100 per barrel as investors tried to gauge the potential damage from the war with Iran.

Although investors have grown increasingly optimistic in recent days that the worst of the war is now behind us, with the S&P rising to a new record high of 7,126 on Friday, there is still some risk that talks between the warring parties could fail and that hostilities could flare up again. While President Trump thanked Iran for declaring that the Strait of Hormuz is open, he also said that the U.S. naval blockade of Iranian ships is still in effect and will remain in effect "until such time as our transaction with Iran is 100% complete."

A spokesperson for Iran's foreign ministry responded, warning that Tehran would see the move as a violation of the ceasefire. "If the other side chooses to break its commitments, which it appears it intends to do, and if the naval blockade continues, the Islamic Republic of Iran will in response take the necessary measures, and there is no doubt about this," the spokesperson said.

That leaves the outlook for the ceasefire and any potential peace deal still clouded in significant uncertainty.

Senate Republicans to Start Their DHS Funding Process Next Week

As congressional Republicans look to move ahead with a partisan plan to fund the Department of Homeland Security's immigration enforcement agencies, Senate Majority Leader John Thune told reporters Thursday that he hopes his chamber can take a big step toward passing a party-line reconciliation bill next week by adopting a budget resolution.

Both the House and Senate need to adopt the same budget framework before they can move forward with a reconciliation package meant to provide roughly $75 billion for Immigration and Customs Enforcement and Customs and Border Protection.

The Senate GOP's plan calls for the Senate to adopt the necessary budget framework and then have the House adopt the same blueprint. House conservatives angrily opposed a two-step Senate plan that called for funding most of DHS via an appropriations bill and passing a reconciliation bill to cover immigration enforcement operations. Some House Republicans now want to fund all of DHS through the party-line reconciliation bill, which would bypass Democrats and avoid a Senate filibuster.

Republicans are now looking to make progress on that reconciliation package first, and GOP leaders in the two chambers are working to prevent any blowups along the way.

"We're communicating as much as we can, making sure that we're syncing this up and doing it in the way that meets the requirements that both bodies have," Thune said Thursday.

In a speech on the Senate floor, Thune rejected a Democratic criticism that Republicans were dragging the Senate through a partisan circus in rejecting Democratic demands for reforms to immigration enforcement tactics.

"Democrats, through their stubborn refusal to seriously engage in bipartisan negotiations - and their ultimate refusal to fund law enforcement at all - have forced us into a position where the only way we can fund law enforcement and border security is through reconciliation," Thune said.

Congress starts work on 2027 funding bills: While this fight over 2026 spending by DHS continues, Congress is also starting work on its 12 annual funding bills for fiscal year 2027. The House Appropriations Committee on Friday held subcommittee markups of the bill covering military construction and veterans affairs and the one for financial services and general government.

The MilCon/VA bill would provide $157 billion in discretionary funding, an increase of nearly $4 billion, or 3%, compared to this year. The financial services and general government bill calls for $25.3 billion in funding, a cut of about $1 billion or 3.8%.

The bottom line: The DHS funding lapse has dragged on for more than two months, but Senate Republicans are now racing to move ahead with their reconciliation plans ahead of a June 1 deadline set by President Trump for the legislation to reach his desk.

Quotes of the Day

"Our economy is booming. You don't read about it, you don't see so much because of what's going on in Iran ... Don't forget, we're having some fake inflation because of the fuel, the energy prices, which everybody said was going to $250 ... A lot of people thought inflation would be through the roof, and the stock market would crash. We just hit an all-time new stock market [high]."

– President Trump, promoting his economic and tax policies at an event in Las Vegas on Thursday.

Noting that the war with Iran has been relatively brief compared to other conflicts the U.S. has been involved in over the last few decades, Trump said he had rejected advice from advisers who warned that an attack would cause oil prices to soar. "I said, I don't think so. I think we are going to be good," Trump said. "We always find a way."

Looking ahead, Trump promised that the economy is going to improve. "For the remainder of 2026, you're going to see a big surge," he said. "The numbers are really tremendous, and that's why I'm out here. If they were bad, I wouldn't be here today. I'd be sitting home watching television."

Trump focused much of his speech on the tax cuts that were created by the One Big Beautiful Bill Act last summer, including his signature "no tax on tips" policy that he said was inspired by a comment from a waitress in Las Vegas.

"Thanks to our tax cuts this week, thousands of Nevada waiters, waitresses, casino dealers, bartenders, bellmen, barbers, caddies ... receive the biggest tax refunds of their entire lives, and you see it," Trump said. "And I just want to say, you're welcome."

"The Trump slump is real."

– Ted Pappageorge, a union official in Las Vegas, quoted in The New York Times.

Rising prices for food, fuel and travel have put a crimp on tourism in Las Vegas, which saw an 11% decline in visitors last year. Pappageorge, whose Culinary Workers Union Local 226 represents upwards of 60,000 workers in Nevada, said union members are "quite nervous and concerned about if there's a continued reduction in visitation," the Times's Chris Cameron reports.

Gas prices are over $5 a gallon in Nevada, up more than 25% from a year ago, an increase driven by Trump's war with Iran. Greg Ferraro, a Nevada political analyst, told The Washington Post that Trump's "no tax on tips" policy doesn't seem to be making up for the loss inflicted by higher prices. "Is it delivering what some had hoped? Probably not," he said. "But it is better than not talking about or recognizing the work that people do and their dependency on tips, that is the deeper and more meaningful discussion."

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