I’ve been closely watching the WTI crude oil price trend lately, and it’s indeed quite interesting. The drop on Wednesday was pretty shocking—at one point it was smashed down to $88.6, hitting a two-week low, and the $90 level was also broken. But later it rebounded again, and in the end it closed around $95.8. This kind of high-volatility market action looks like it will likely continue.

The key is what’s happening in the Middle East. Trump suddenly announced a pause to the “Freedom Plan,” and also said it’s highly possible that the U.S. will reach an agreement with Iran, which directly eased market jitters. Saudi Arabia also stated clearly that it will not allow the U.S. military to use its own bases and airspace—another reason why oil prices were able to rebound.

More importantly, on Thursday Iran is set to submit its response to the U.S. proposal to mediators. Based on the information available so far, both sides are working toward reaching a ceasefire agreement. This memorandum covers 14 clauses, including Iran suspending uranium enrichment, the U.S. lifting sanctions and unfreezing assets, and both sides loosening (removing) restrictions on navigation through the Strait of Hormuz—these are the core contents.

But the problems are also obvious. On the two issues of uranium enrichment activities and sovereignty over the strait, there are still major differences between the U.S. and Iran. Iran’s top military adviser said explicitly that Iran will not let the U.S. get away without consequences. In addition, the U.S. Central Command also disclosed that Iranian oil tankers attempting to break through the blockade were struck, which shows that the risk of conflict still exists.

My view is that, although it may be difficult to reach a final agreement in the short term, given that a ceasefire and open navigation are beneficial for all parties, it’s not ruled out that the U.S. and Iran could temporarily put aside major differences and first reach a short-term agreement to set the foundation for subsequent negotiations. That’s how the market is looking at it right now— the 10-year U.S. Treasury yield has already fallen to 4.35%, indicating that investors are relatively optimistic about the situation cooling down and easing supply pressures.

However, there’s a hidden risk here that can’t be ignored. Global oil inventories are approaching an eight-year low, leaving very limited buffer space. If there’s a reversal in subsequent negotiations, crude oil could surge again into a high-volatility mode. At that point, the lack of inventory support would make oil prices swing even more violently.

From a technical perspective, WTI crude oil has already fallen below $100, with the bears clearly holding the advantage. It may further test the key support level at $85; if that breaks, it could form a narrowing triangular consolidation pattern. The time windows of May 26 and June 10 are worth paying close attention to, because major market moves may occur during this period. Overall, crude oil is likely to maintain high-volatility characteristics, and in the short term it will be hard to find a clear direction.