Oil markets swung sharply lower Wednesday after Iranian state television reported it had seen a draft framework for a US-Iran agreement to reopen the Strait of Hormuz.
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WTI crude plunges 5.6% to $88.68 as Iran-US deal progress eases supply fears
Oil markets swung sharply lower Wednesday after Iranian state television reported it had seen a draft framework for a US-Iran agreement to reopen the Strait of Hormuz.
WTI crude tumbled 5.55% to $88.68 a barrel, its steepest single-day drop in more than a month, as signs of a diplomatic breakthrough between Washington and Tehran threatened to reverse a supply crisis that has removed more than 14 million barrels a day from global markets.
"The market keeps reacting to headlines, but there is no indication this is something different from what we kept hearing since the weekend," said Giovanni Staunovo, an analyst at UBS. "Oil flows through the strait remain restricted, reducing further inventory draws."
Brent crude for July delivery fell $3.66, or 3.7%, to $95.92 a barrel, while Abu Dhabi's Murban crude declined 3.76% to $91.48. The losses erased Tuesday's gains, when Brent rose 3.6% after the US carried out fresh strikes in Iran. Iranian state television said the US would withdraw military forces from the vicinity of Iran and lift its naval blockade, with ship traffic management through the Strait of Hormuz to be handled by Iran in cooperation with Oman.
The Strait of Hormuz handles about a fifth of the world's oil supply, and its effective closure since late February has removed more than 14 million barrels per day of Middle East crude from the market, according to the International Energy Agency. A resumption of flows would rapidly rebuild global inventories and pressure prices further, though analysts at Piper Sandler warned the waterway could remain closed for months.
Deal Details Remain Unconfirmed
The Iranian state television report cited a draft of an initial, unofficial framework, but no formal agreement has been announced by either government. The report also contradicted earlier Iranian comments that the United States had violated a ceasefire. A tanker off the Oman coast reported an explosion Tuesday, showing the fragility of the security situation in the region.
PVM analyst Tamas Varga said the downward pressure on prices reflected palpable progress toward ending the supply crisis, with an increasing number of ships transiting the strait. "This is why the downward pressure has resumed," he said.
Broader Energy Complex Under Pressure
The selloff extended across the energy complex. NYMEX June gasoline futures fell to $3.1337 a gallon, while June heating oil settled at $3.5975 a gallon. Natural gas for June delivery closed at $3.04 per million British thermal units, largely unchanged as traders focused on seasonal storage builds.
The last time WTI posted a comparable single-day decline was in early April, when initial ceasefire reports first emerged. That drop proved short-lived as fighting resumed within days, and Brent subsequently rallied back above $100. The key question for traders now is whether this diplomatic signal carries more weight than previous rounds of talks.
If a verified agreement emerges, the return of Iranian supply could push Brent below $90 and WTI below $85, levels not seen since before the conflict began in late February. If talks collapse again, the supply deficit — already the largest since the 1990 Gulf War — would deepen, potentially driving prices to new highs.
This article is for informational purposes only and does not constitute investment advice.
[1] WTI crude oil futures for July delivery fell $5.21, or 5.55%, to $88.68 per barrel[2] Brent crude jumps 4%, as US strikes in Iran set back hopes for Hormuz re-opening[3] Oil extends drop as Iran TV says it has seen draft deal with US to reopen Hormuz[4] WTI falls nearly 3% to $91.25 as traders weigh US-Iran deal progress[5] Piper Sandler says Strait of Hormuz to remain closed for months and oil to hit new highs
