Prices at gas pumps are starting to sink and oil is on track to drop 20% in May — its largest one-month decline since 2020 — as investors remain optimistic that a deal to end the Iran war is near.

As of Friday, national average gasoline prices had eased to $4.39 a gallon, according to AAA. That’s about 17 cents lower than the 2026 peak price of $4.56 a gallon – though it’s still nearly 50% higher than pre-war prices.

Brent crude oil had fallen 1.3% to $91.51 a barrel as of about 2:50 p.m. ET Friday. The global benchmark was poised to fall about 20% from its 2026 peak. 

West Texas Intermediate crude dropped 1.9% to $87.19 Friday, and was also looking at a 19% monthly drop for the month.

The benchmarks plunged Thursday after the White House confirmed that US and Iranian negotiators have reached a potential agreement to reopen the Strait of Hormuz, a vital maritime route for 20% of the world’s oil that has been largely blocked off for months.

Oil prices continued to fall Friday after President Trump posted on Truth Social that he would be meeting in the Situation Room “to make a final determination” on the deal.

Meanwhile, the S&P 500 and Nasdaq hit fresh record highs this week – another sign that traders are optimistic about a speedy end to the war, even as the strait remains largely blocked off and oil executives sound the alarms over shrinking supplies.

On Thursday, ExxonMobil senior vice president Neil Chapman issued a dire warning about global oil inventories – and the potential for $150 crude oil to become a reality in just a few weeks.

“We’re approaching unheard-of inventory levels,” Chapman said at a conference hosted by Bernstein in New York. 

“I mean really, really low levels,” he continued. “You can debate whether that’s going to hit, those really low levels, in two weeks or three weeks. Once you get to that point, then you’ll see price shoot up.”

He cautioned that oil prices could jump above $150 a barrel – which would translate to $9 gasoline in California, “and that will be a serious issue.”

Chevron CEO Mike Wirth said Friday energy inventories have been tightening, even as demand remains strong, and that it could take many weeks for prices to normalize.

Asked on Bloomberg TV why those risks haven’t been showing up in the form of $200-a-barrel oil, Wirth argued there’s a belief “that the end is near, the conflict is nearly resolved and flow through the strait will resume very quickly.”

But “it’s going to take months … to make sure that the mines have been cleared, to get 2,000 ships out” of the strait, Wirth said. “They don’t all go out at once. You need weeks and weeks.”

There have been new attacks on ships this week, “so we see risks very real, still, in that environment,” he added.

Another reason markets could be willing to look past supply disruptions is that US stockpiles are cushioning some of the blow – for the time being.

“The drop in oil inventories has come disproportionately from the Strategic Petroleum Reserve,” Jeff Krimmel, founder of Krimmel Strategy Group, told The Post.

Commercial inventories are down about 25 million barrels so far this year, while the reserve is 40 million barrels lower, according to the US Energy Information Administration.

“Because the commercial inventory cushion is still strong, markets aren’t worried about lack of supply here in the US,” Krimmel said. 

“Of course if flows through the Strait of Hormuz don’t reopen soon, then the international call on US crude will continue to grow, and we could find ourselves in an inventory squeeze that would affect prices.”

Analysts have said it could take six to eight weeks for oil prices to stabilize once the war ends, since it will take time to find available vessels to traverse the strait. Damages to Middle Eastern energy facilities could also prolong the disruption.

Treasury Secretary Scott Bessent has said that oil and gasoline prices will fall dramatically once the conflict is over.