TL;DR

The Trump administration invoked a legal argument that the Iran war has been "terminated" to sidestep a May 1 War Powers deadline, avoiding the need for Congressional authorization. Hours later, Trump publicly rejected Iran's latest peace proposal delivered through Pakistani mediators. Exxon CEO Darren Woods warned Friday that current oil prices do not reflect the full scale of the supply disruption. WTI crude fell 3% to $101.94 and Brent lost 2% to settle at $108.17 as of 3 p.m. ET, as brief peace optimism was rapidly unwound by Trump's rejection.

Friday, May 1 marked the 60-day deadline under the War Powers Resolution, the 1973 law that requires a president to either obtain Congressional authorization or withdraw troops within 60 days of notifying Congress of military action. Trump notified Congress on March 2, setting up this deadline.

Rather than seeking authorization or withdrawing, the administration argued that a ceasefire reached on April 7 effectively ended the hostilities that began on February 28.

"For War Powers Resolution purposes, the hostilities that began on Saturday, February 28, have terminated," an administration official told NBC News. The argument was previewed by Defense Secretary Pete Hegseth during a House Armed Services Committee hearing on Thursday.

However, the ceasefire is partial at best. Iran continues to hold the Strait of Hormuz, and the U.S. Navy is maintaining a blockade on Iranian oil exports. The situation remains far from resolved.

Iranian state media and Pakistani officials confirmed Friday that Iran submitted a new peace proposal through mediators in Islamabad. The proposal briefly pushed oil prices lower as traders priced in a potential resolution. That relief was short-lived.

"Iran wants to make a deal, but I'm not satisfied with it," Trump told reporters at the White House. "Iran wants to make a deal because they have no military left." Trump did not specify which terms were unacceptable, but said Tehran may never "get there" on a deal, according to CNN.

The combination of a legalistic War Powers declaration with a rejected peace proposal leaves the conflict in limbo: no formal military escalation on paper, but no path to reopening the Strait of Hormuz either.

Why Oil Prices Moved: The Supply Buffer Is Running Out

Oil prices have been driven by the ongoing closure of the Strait of Hormuz, through which roughly 20% of global oil supply transits. The disruption has been partially cushioned by several factors that Exxon CEO Darren Woods identified on the company's first-quarter 2026 earnings call:

  • A large number of loaded tankers that were already in transit when the war began in late February
  • Strategic petroleum reserve releases by the U.S. and allied governments
  • Commercial inventory drawdowns across major consuming nations

"It's obvious to most that if you look at the unprecedented disruption in the world supply of oil and natural gas, the market hasn't seen the full impact of that yet," Woods said. "There's more to come if the strait remains closed."

Woods noted that Exxon's Middle East production would fall by approximately 750,000 barrels per day compared to 2025 if the Strait remains closed. He added that once the Strait reopens, oil flows would normalize within one to two months as tankers reposition and the supply backlog clears. Governments and industry would then need to replenish depleted strategic reserves, adding further upward demand pressure even after reopening.

Exxon and Chevron both beat earnings-per-share estimates for Q1 but missed revenue expectations, reflecting the disruption to Middle East operations and delivery logistics.

U.S. natural gas futures also settled at a three-week high on Friday as producers cut output in response to mild weather and above-average inventory levels.

Implications for Traders

Oil and Energy Futures Traders

The War Powers declaration is a legal and political maneuver, not a military one. It does not reopen the Strait of Hormuz or lift the blockade. Traders need to track actual physical supply flows, not diplomatic signaling. The Exxon warning is the more operationally significant data point: as transit tankers, reserves, and inventories are gradually exhausted, there is no supply buffer left to absorb a prolonged closure. The current WTI price near $101-102 reflects ceasefire hopes. A renewed escalation or breakdown in the Pakistan channel could send prices sharply higher again.

Equity Traders

U.S. equities continued to decouple from oil volatility in April. The S&P 500 posted its best month since November 2020, driven by earnings strength and hopes for an eventual Iran deal. That divergence is the key risk: if the situation deteriorates sharply, stocks have not priced in a meaningful escalation premium. Energy sector stocks (XOM, CVX) beat estimates but missed revenue, suggesting the market has partially adjusted for supply disruption at the individual company level.

Macro and Safe-Haven Traders

Gold and safe-haven assets have benefited throughout the conflict. The unresolved War Powers situation adds political risk: if Congress pushes back on the administration's legal argument, a constitutional conflict over war authority could create additional market uncertainty heading into summer.

Potential Positives vs Negatives

Potential Positives

  • Iran submitted a new proposal. The Pakistan backchannel is still active, suggesting both sides retain interest in a negotiated exit. Even Trump's rejection was conditional rather than a final no.
  • Lower oil eases inflation pressure. WTI back below $105 reduces near-term pressure on the Federal Reserve and consumer prices globally.
  • Reopening scenario is constructive for refinery margins. A Hormuz reopening would allow the supply backlog to clear, benefiting refiners positioned to process deferred crude flows.

Potential Negatives

  • No structural resolution is in place. The ceasefire is fragile, the blockade is active, and the Strait remains closed. Supply buffers are depleting steadily.
  • Trump's rejection raises escalation risk. Reuters reported that U.S. Central Command has prepared a plan for a fresh wave of strikes to break the negotiating impasse.
  • War Powers legal fight could create market uncertainty. Congressional Democrats and some Republicans may challenge the administration's legal argument.
  • Natural gas supply constraints building. With Qatar LNG train damage earlier in the conflict, a prolonged Strait closure drives natural gas prices higher globally.

What Could Happen From Here: Base, Upside, and Downside Scenarios (24-72 Hours)

Base Case: Diplomatic Holding Pattern

Iran refines its proposal based on U.S. feedback, and Pakistan mediators continue shuttling between Washington and Tehran. No military action. Oil trades in a wide $95-115 band, oscillating on each headline. Confirmed by further exchange of proposals through Pakistan in the next 48-72 hours with no new military activity.

Upside Case: Breakthrough Toward a Deal

If Iran addresses Trump's undisclosed objections, a framework agreement could be announced over the weekend. Brent would fall sharply toward $80-90 as Strait reopening becomes credible. Equities, particularly energy consumers and airlines, would rally hard. Confirmed by Trump signaling satisfaction with new terms, or Witkoff and Kushner resuming their Pakistan trip.

Downside Case: Escalation or Breakdown

If Trump authorizes a fresh strike campaign to force Iran's hand, or Iran retaliates against U.S. Navy assets, oil could spike back toward $120-130. Confirmed by CENTCOM activity reports, Iranian IRGC naval movements, or Trump escalatory statements over the weekend.

What to Watch Next (24h)

  • Pakistan backchannel update: Any new statement from Pakistani officials on whether the U.S. has responded to Iran's revised proposal.
  • Trump and Witkoff statements: Will the special envoy resume the Islamabad trip cancelled last weekend?
  • Congressional reaction: Will lawmakers challenge the War Powers "terminated" claim?
  • Monday oil open: Asian markets will react to the net outcome of Friday's news flow. WTI and Brent futures in Sunday evening trading will set the tone.
  • Iran military posture: IRGC statements or naval movements near the Strait over the weekend.

Frequently Asked Questions

Why does the War Powers deadline matter for oil markets?
The 60-day deadline forced the Trump administration into a public position about whether the war is ongoing. By declaring hostilities "terminated," the White House avoided a politically uncomfortable Congressional vote, but the legal argument is contested. A prolonged constitutional dispute would inject additional uncertainty into the fragile ceasefire situation.

Is WTI at $101 a fair price given the supply disruption?
Not according to Exxon's CEO. The current price reflects the mitigating effect of transit tankers, strategic reserves, and commercial inventories. As those buffers are drawn down, the full impact of the Strait closure will increasingly show in prices. If the disruption extends another quarter, significant upward price pressure is likely unless a deal materializes first.

Sources

For more context on how the Iran conflict has reshaped the energy and equity landscape since February, see our earlier analysis on ChartDojo Blog. Trading requires real skills, not just news alerts. At ChartDojo, you will get AI-powered feedback on every trade so you can build real skills, not bad habits. Start your free trial today and trade with an edge.

Header image source: pexels by Luca Sammarco. License: PEXELS.