The Trump administration this week sparked enthusiasm that the U.S. and Iran could soon strike a deal on the Strait of Hormuz, driving down oil prices and sending stocks soaring only for no deal to emerge. If that sounds familiar, it may be because President Donald Trump has claimed dozens of times that the U.S. is close to an agreement that will end the war it began more than five months ago. Investors have reacted to many of those claims with bursts of buying on hopes a breakthrough is near, even as the war instead appears to be widening and progress on Trump's chief stated goal containing Iran's nuclear ambitions is at a standstill. "There's tremendous optimism bias in the market," Helima Croft, global head of commodity strategy at RBC Capital Markets, told CNBC. Markets continue to assume incentives for both the U.S. and Iran favor a diplomatic end to the war. But some investors seem to "see a deal as a time machine" that will reset the Middle East to its prewar status quo, even though that's unlikely to happen, Croft said. The conflict of late centers on the Strait of Hormuz , a vital passageway for the global oil trade that has became a source of major leverage for Iran. Tehran's ability to effectively close the strait an open, un-tolled international waterway before the war started triggered a global energy supply shock that drove up gas prices, exacerbated inflation and raised alarms about oil reserves . Even those who believe diplomacy remains a viable path to peace acknowledge the future of the strait presents an intractable problem. "There still appears to be a fundamental difference over the fate of Hormuz: Iran wants to impose a service fee, while the US wants the pre-war situation restored, i.e., international, free waters in the Strait," Claudio Galimberti, partner and chief economist at Rystad Energy, said by email. The White House did not immediately respond to CNBC's request for comment on this article. The oil market is eager for any hint of progress toward reopening the strait. Treasury Secretary Scott Bessent provided a major dose of optimism Tuesday morning when he told CNBC's " Squawk Box " that a deal to ensure "freedom of movement" in the strait could come in a matter of hours. "We are in talks with the Iranians," Bessent said. "There is a chance we may have a deal today or tomorrow to open the strait and move towards a more normalized position in this conflict." Oil prices tumbled right after Bessent's remarks, while stocks blasted higher and bold yields pulled back, as investors' optimism coincided with an AI-fueled tech rally. Crude prices remain highly elevated from their prewar levels, however, as traders bounce between hope for a durable solution in the strait and bracing for a military escalation by the U.S. The market "remains trapped in a spiky muddle-through dynamic," Bob McNally, president of Rapidan Energy Group, told CNBC in an email. "While Iran and Oman may...
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