Trump is gaining surprising leverage over Iran

The massive decline in oil prices over the past few weeks has gifted the Trump administration with some unexpected leverage in its ongoing negotiations with Iran. Despite an obliterated navy and air force, Iran wielded significant economic power in the spring. It effectively closed off the Strait of Hormuz to oil tanker traffic by threatening vessels with makeshift drones and explosive-packed speedboats. That persistent threat kept oil prices high through March, April and May, sending gas prices surging and global oil inventories to dangerously low levels.

But now, the Strait of Hormuz is gradually reopening. Oil traders expect the historic oil supply shortage to quickly turn into a major glut as the world is flooded with crude. That’s why Brent crude hovers right around $70 a barrel, trading below its price from two weeks before the war. The shockingly low price of oil has eased pressure off US negotiators to sign a quick and potentially lopsided deal in favor of Iran – and buying the Trump administration some much-needed time.

Low supply drove gas prices to four-year highs – and consumer confidence to record lows. So it’s mindboggling to consider that the world may soon be awash in oil again. But that’s exactly what oil industry analysts expect. As the Strait of Hormuz reopens, tens of millions of barrels of oil are coming through the Persian Gulf again. The only problem: It’s not clear anyone really wants all this oil. Demand tumbled during the war as prices surged and fuel was in short supply. The world spent months learning how to function with limited fuel.