Hedge funds surged into bearish positions on U.S. crude, lifting net short exposure to its highest level in almost five months. Traders cited growing confidence that Washington and Tehran will soon sign a preliminary peace deal, a move expected to reopen tighter shipping lanes in the Strait of Hormuz. The shift signals a rapid reassessment of supply risk ahead of the deal this week.

The bearish tilt reflects investors’ calculation that a de‑escalation in the region will boost oil flow, pressuring prices lower. By betting on a drop in U.S. benchmark benchmarks, funds aim to profit from any price weakness that follows the diplomatic breakthrough. Market participants note that the positioning could amplify volatility if the talks potentially stall or produce a limited agreement.

For energy companies, the sentiment translates into tighter profit forecasts as lower crude prices erode margins. Refiner inventories may rise as traders hedge against a sustained price slide, while exporters watch for any shift in freight rates through Hormuz. The net effect is a market poised for sharper price swings once the MOU’s details become public.