Oil prices fell sharply on Wednesday morning as traders looked for momentum in US-Iran negotiations, with hopes spurred by reports from Iranian state media that such a deal would reopen the Strait of Hormuz.
Futures on Brent crude (BZ=F), the international benchmark, fell 4.2% to trade below $93 per barrel, while those on US benchmark WTI crude (CL=F) stumbled by a steeper 5.7% to trade below $89.
Oil prices dropped precipitously at around 9 a.m. ET after Iranian state media, which is understood to be tightly controlled by the regime, reported that a draft memorandum between the US and Iran said Iran would restore shipping through the Strait of Hormuz to pre-war levels within 30 days, while the US would withdraw its military from the area and lift its naval blockade.
Prices had ticked up on Monday and Tuesday after the US said it launched a new round of airstrikes in southern Iran, the US military’s first major action against the Islamic Republic since the two nations initially agreed to a ceasefire.
Without further escalation — the US called the strikes “defensive” — traders have swung their focus back to President Trump’s announcement over the weekend that Washington and Tehran are close to agreeing on terms to restart peace negotiations, with a full ceasefire on all fronts and a reopening of the Strait of Hormuz as preliminary conditions.
“The markets are just waiting for something tangible now when it comes to a deal between the US and Iran,” Capital.com analyst Kyle Rodda wrote in a client note.