Oil markets delivered a striking verdict after reports that U.S. forces hit Iran’s Qeshm Island: traders see a possible deal, not yet another leap toward all-out war.

Crude had climbed more than 10% in October as speculation grew that Washington was preparing strikes after the U.S. midterm elections. The conflict, now in its eighth month, has disrupted energy supplies and left commercial shipping exposed across the Persian Gulf, Strait of Hormuz and Gulf of Oman. At least four ship attacks have been reported since the start of the month.

Then came Monday’s reported strike on Qeshm, an Iranian island near the Strait of Hormuz. U.S. officials told The Wall Street Journal that Washington had also conducted “limited strikes” in recent weeks, keeping the campaign deliberately quiet to avoid telegraphing a major escalation. Yet the same administration has emphasized that force is not its preferred end point.¹

President Donald Trump said Tehran wants “to make a deal,” while Vice President JD Vance said he and the president felt “really good” about the prospect of a negotiated settlement. Secretary of State Marco Rubio likewise said Trump wanted to resolve the war diplomatically.

That message moved markets quickly. Oil sold off more than 7% on Monday after both sides signaled openness to talks. On Tuesday, West Texas Intermediate fell 42 cents to $96.04 a barrel, after briefly dropping below $95, while Brent declined $1.23 to $103.54.

Qatar is now trying to turn those signals into an agreement. Its delegation met Iranian officials in Tehran, seeking a deal that would halt escalation and end the U.S.-Iran conflict. The market’s optimism rests on that effort—but with ships still under attack and strikes continuing, the diplomatic wager remains fragile.