Morning Highlights: Brent at $96 as U.S. and Iran Exchange Strikes Near Bandar Abbas; Trump Rejects Draft Deal, Threatens Oman, U.S. Sanctions Persian Gulf Strait Authority

Thursday, May 28, 2026 | 6:15 AM ET

Brent (July) $95.92 | August Brent $93.86 | WTI (July) $90.23 July Brent expires Friday. Brent +1.63 (+1.7%), WTI +1.55 (+1.7%), recovering from Wednesday's 5% drop. U.S. crude stocks fell 2.8 million barrels last week per API, sixth consecutive weekly decline. EIA data due today, delayed one day by Memorial Day. U.S. strikes Iranian drone operation near Bandar Abbas; IRGC retaliates against U.S. airbase; Kuwait intercepts missiles and drones; Trump rejects draft Hormuz deal and threatens Oman; U.S. Treasury sanctions Persian Gulf Strait Authority; IEA says global energy investment hitting $3.4 trillion as war reshapes strategies.

Bottom Line

Trump rejecting the Iranian state TV draft deal report as a complete fabrication and then threatening Oman in the same cabinet meeting is the diplomatic development that matters most this morning. The draft, which would have restored commercial shipping within a month with Iran and Oman jointly managing Hormuz traffic was dismissed before it could be tested, and Trump's threat toward Oman, one of the U.S.'s most reliable Gulf diplomatic partners and the primary back-channel for U.S.-Iran communications throughout this conflict, is the kind of statement that makes every regional intermediary reconsider their role. Iran expressing solidarity with Oman after the threat is a small but meaningful signal that Tehran recognized an opening.

The exchange of strikes near Bandar Abbas follows the now-familiar pattern - U.S. strikes described as defensive, IRGC retaliation described as proportionate, both sides technically still within the ceasefire framework while conducting active military operations against each other. Kuwait intercepting missiles and drones without identifying the source adds another Gulf state to the list of collateral damage absorbers. The IRGC warning that any repeat would lead to a more decisive response is the standard escalation language, but the geographic proximity of the strikes to active Hormuz shipping lanes is what gives it market relevance.

The U.S. Treasury sanctioning the Persian Gulf Strait Authority - Iran's newly created body to manage Hormuz passage seems to be the correct policy response to Iran institutionalizing its control of the waterway, but it also complicates any near-term deal that involves Iran managing transit through a formal mechanism. If the PGSA is sanctioned, any shipping company or financial institution that coordinates with it for vessel passage is potentially in violation of U.S. sanctions, which means the selective transit model Iran has been operating cannot easily be formalized into a commercial framework without sanctions relief that Washington is explicitly not discussing.

The IEA's $3.4 trillion global energy investment figure and Birol's framing of this as the largest energy security crisis the world has ever faced - with parallels to the 1970s oil shocks - is the strategic context that sits behind every daily price move. Crude oil investment declining for a third consecutive year to $500 billion despite the price surge tells you the upstream response to the supply crisis is not materializing at the scale the price signal should be generating. Natural gas investment surging to a ten-year high and solar topping $365 billion reflects the structural investment shift the crisis is accelerating, but none of that changes the near-term physical supply picture that still has 10-plus million bpd shut in.

Top Developments

U.S. and Iran Exchange Strikes Near Bandar Abbas, Kuwait Intercepts Attacks

The U.S. military shot down four Iranian attack drones and struck a ground control station in Bandar Abbas that was about to launch a fifth drone, with a U.S. official describing the action as measured, purely defensive and intended to maintain the ceasefire. The IRGC subsequently said it targeted the U.S. base responsible for the Bandar Abbas strike, warning that any repeat would lead to a more decisive response. Kuwait said it was responding to missile and drone attacks without identifying their origin. Israel simultaneously escalated strikes on Hezbollah infrastructure in Tyre, Lebanon, killing a Lebanese army soldier -- an escalation Iran has consistently cited as a condition that must be resolved in any broader settlement.

Trump Rejects Draft Deal, Threatens Oman, Rules Out Sanctions Discussion

Trump dismissed an Iranian state TV report of an unofficial draft agreement that would restore commercial Hormuz shipping within a month under joint Iran-Oman management, calling it a complete fabrication. He said no single country would control the strait, adding that Oman would need to behave or the U.S. would have to "blow them up." Oman has not commented on the joint management proposal. Iran expressed solidarity with Oman following the threat. At the same cabinet meeting, Trump said he was not satisfied with Iran talks and the U.S. was not discussing sanctions relief -- one of Tehran's explicit conditions. Iran's deputy NSC secretary said release of frozen Iranian funds remains a firm demand. The White House separately dismissed an Iranian TV report on U.S. military withdrawal from the region as a complete fabrication.

U.S. Treasury Sanctions Persian Gulf Strait Authority

The U.S. Treasury added Iran's newly created Persian Gulf Strait Authority to its sanctions list, designating it as a threat to U.S. national security. The PGSA was established by Iran in late May to formally manage and charge fees for Hormuz passage. The sanctions designation means any entity coordinating with the PGSA for vessel transit is potentially in violation of U.S. law, complicating any deal framework that relies on Iran managing a formal transit mechanism. Two supertankers and one LNG tanker exited the strait this week with transponders off, heading to India and China, continuing the tracker-off transit pattern that has been the market's self-help mechanism throughout the conflict.

IEA: Global Energy Investment at $3.4 Trillion, Crude Upstream Declining Despite Price Surge

The IEA said global energy investment will reach $3.4 trillion in 2026, with $2.2 trillion in electricity including renewables and nuclear, and $1.2 trillion in oil, gas and coal. Despite the price surge triggered by the war, crude oil investment is declining for a third consecutive year to $500 billion. Natural gas investment is surging to a ten-year high of $330 billion. IEA Secretary-General Birol described the current situation as the largest energy security crisis the world has ever faced, with parallels to the 1970s oil shocks, and said the crisis is reshaping investment strategies globally toward supply diversification and domestic resource development. Initiatives cited include surging interest in Canadian oil and gas and ADNOC's accelerated Fujairah pipeline doubling targeting 2027 completion.

LPG Cargo Cancellations Signal Freight Cost Breaking Point

Asian buyers have canceled at least two U.S. Gulf Coast LPG cargoes scheduled for June departure as soaring freight rates eliminate the economics of long-haul U.S. LPG imports, per Bloomberg. Additional cancellations are under discussion. Gulf LPG supplied 92% of India's and 26% of Southeast Asia's imports in 2025 before the conflict disrupted those flows. U.S. LPG had been filling the gap but the freight cost to move propane and butane from the Gulf Coast to Asia has reached the point where margins for importers are negative. India signed a strategic LPG supply agreement with the UAE earlier this month and India-bound LPG tankers have begun transiting Hormuz in dark mode as the selective passage pattern continues to expand at the margin.