Oil prices continued to fall on Thursday after hopes of a Middle East peace deal eased concerns about supply disruptions and boosted expectations of a gradual reopening of the Strait of Hormuz.
International benchmark Brent crude futures fell nearly five percent to $96.50 a barrel by 2:55 p.m. U.S. benchmark West Texas Intermediate crude fell 4.8 percent to $90.50.
The drop in prices followed reports that the United States, through Pakistani intermediaries, sent Iran a unilateral memorandum of understanding aimed at formally ending the war and establishing a framework for the gradual restoration of passage through the maritime corridor.
Tehran is expected to respond in the coming days after confirming it is considering the proposal, although wider talks on Iran’s nuclear program are due to be held separately at a later stage.
However, US President Donald Trump has said that no deal has yet been finalized, warning that it would be a “big guess” to expect Iran to accept the proposal. He also added that the US could resume military attacks if Tehran does not meet the conditions.
Oil prices were further pressured after Trump temporarily abandoned a plan to support commercial ships passing through the Strait of Hormuz.
Trump’s sudden U-turn follows the key Gulf ally’s decision to suspend the US military’s use of its bases and airspace for the operation, NBC News reported Wednesday, citing sources.
The development further strengthened expectations that Washington could shift from military measures to a diplomatic approach, reducing fears of a wider disruption in one of the world’s most important energy corridors.
The Strait of Hormuz is a key point for global oil and liquefied natural gas shipments, and weeks of conflict in the region have previously sent crude prices sharply higher on concerns about supply shortages.
