Donald Trump circulated a draft Iran peace agreement to allies including Israel on May 28, 2026, as tensions over the Strait of Hormuz escalated following U.S. strikes and Iranian retaliation. The proposal, which would open the strait to commercial shipping and unfreeze $12bn in Iranian assets, faces resistance from Israel and regional actors skeptical of Tehran’s control over the waterway.
The Draft Agreement’s Key Terms
The proposed framework, shared by Trump with Israeli and regional leaders, envisions a 60-day ceasefire extension to negotiate Iran’s nuclear program. It includes lifting the U.S. blockade on Iranian ports, granting access to up to $12bn in frozen assets, and establishing pre-war levels of commercial traffic through the Strait of Hormuz. The deal also requires Iran to renounce nuclear weapons and allow IAEA supervision of its uranium stockpile. However, the terms remain vague on oil sanctions and toll-free navigation, according to the Guardian.
“No matter what happens, the Iranians will control the Strait of Hormuz for the foreseeable future, it doesn’t even matter what the deal says,” said Amos Hochstein, a former Biden energy advisor, citing regional consensus. The White House dismissed reports that Iran had agreed to a memorandum of understanding (MOU) with the U.S. to manage the strait, calling it a “complete fabrication.”
Regional Tensions and Military Posturing
Iran’s Islamic Revolutionary Guard Corps (IRGC) reiterated its dominance over the Strait of Hormuz, stating that “seeking permission is mandatory and passage through other routes will be considered as disruption.” The IRGC intercepted four ships attempting to transit the strait without transponder signals, forcing two to turn back and holding two in place. This follows a U.S. strike on an Iranian military site near the strait, which Iran retaliated against by targeting a U.S. air base in Kuwait. The U.S. intercepted ballistic missiles and drones launched by Iran, according to a senior official.
For more on this story, see US-Iran Deadlock Threatens Strait of Hormuz, Sparks Global Energy Crisis.
Trump threatened to “blow up” Oman if it negotiated tolls for strait navigation, escalating pressure on regional allies. Pakistan’s foreign minister, Mohammad Ishaq Dar, is set to meet U.S. Secretary of State Marco Rubio to discuss the deal, as China pushes for UN Security Council ratification. Israel, however, opposes the agreement’s lack of firm nuclear commitments and its inclusion of Lebanon in the ceasefire, according to the Guardian.
Oil Markets and Economic Implications
Global oil prices surged on May 28, with Brent crude rising 0.75% to $95 per barrel and U.S. West Texas Intermediate futures climbing $1.29 to $89.97. The jump followed reports of U.S.-Iran negotiations, though prices later retreated as uncertainty lingered. Citigroup noted that markets are stabilizing as investors price out worst-case scenarios, but warned that timing delays could spur central bank interventions to curb energy-driven inflation.
The deal’s economic stakes are high. Iran’s state television claimed the MOU would let Tehran and Oman manage strait traffic, but the White House denied the report. The U.S. insists no single nation will control the strait, despite regional perceptions of Iranian dominance. “The Iranians will control the Strait of Hormuz for the foreseeable future,” Hochstein said, highlighting the gap between diplomatic rhetoric and on-the-ground realities.
This follows our earlier report, Trump’s ‘Project Freedom’: U.S. to Guide Ships Through Strait of Hormuz Amid Iran Tensions.
Unresolved Deadlocks and Geopolitical Risks
The agreement’s fate hinges on Trump’s approval and Israel’s acceptance. The U.S. and Iran have been locked in a stalemate since April’s fragile ceasefire, with both sides refusing to compromise on core demands. Iran’s insistence on toll-free navigation clashes with U.S. and regional interests, while Israel’s opposition to Lebanon’s inclusion in the ceasefire remains a sticking point. The IRGC’s recent actions underscore its determination to assert control, even as diplomatic talks proceed.
“The U.S. and Iran have been locked in a stalemate over the Strait of Hormuz since agreeing to a fragile ceasefire in April,” noted the Guardian. With oil prices volatile and military posturing intensifying, the path to a lasting agreement remains fraught. The next 30 days will test whether diplomacy can outpace escalation, or if the strait’s strategic importance will once again plunge the region into conflict.
