Oil Prices Fall 6% as U.S. and Iran Near Deal to End War and Reopen Strait of Hormuz

TLDR

• Brent crude fell 6.2% to $103.04 and WTI dropped 6.6% to $95.55 on reports of a U.S.-Iran deal
• The U.S. and Iran are close to a one-page memorandum of understanding to end the conflict
• Iran would pause nuclear enrichment; the U.S. would lift sanctions and release frozen funds
• Trump paused “Project Freedom,” the U.S. operation to escort ships through the Strait of Hormuz
• U.S. crude inventories fell 8.1 million barrels last week, the biggest draw since mid-February

Oil prices fell sharply on Wednesday after reports that the U.S. and Iran are close to a deal that could end the war and reopen oil flows through the Strait of Hormuz.

Brent crude dropped 6.2% to $103.04 per barrel. West Texas Intermediate fell 6.6% to $95.55. Both contracts had already fallen nearly 4% the day before.

The sell-off followed an Axios report saying the White House is nearing a one-page memorandum of understanding with Iran. The deal would set the stage for wider nuclear talks.

U.S. officials said they expect responses from Tehran on key issues within 48 hours. No final agreement has been signed, but officials described this as the closest both sides have come to a deal since fighting began.

The proposed framework includes Iran agreeing to pause nuclear enrichment. In return, the U.S. would lift sanctions and release billions of dollars in frozen Iranian funds.

Both sides would also ease restrictions on shipping through the Strait of Hormuz. The strait is a critical passage for global oil exports.

Oil prices have risen around 50% since the conflict started in late February. The war cut off hundreds of millions of barrels of Persian Gulf oil from world markets.

More than 1,550 commercial vessels carrying around 22,000 sailors are currently trapped in the Persian Gulf, according to General Dan Caine, chairman of the Joint Chiefs of Staff.

Hormuz Blockade Paused, But Supply Recovery Will Take Time

President Trump said the U.S. would pause “Project Freedom,” its operation to escort commercial ships through the strait, while deal talks continue.

Secretary of State Marco Rubio told reporters that “Operation Epic Fury is concluded,” 66 days after the U.S. and Israel began military action against Iran.

ING analysts warned that roughly 13 million barrels per day of disrupted supply is being offset by falling inventories. “Tighter stocks will only leave the oil market trading in an ever more volatile manner,” they said.

U.S. Crude Stocks See Large Drop

Despite the price drop, U.S. supply data offered some support to the market. The American Petroleum Institute reported crude inventories fell 8.1 million barrels last week. Gasoline stocks dropped 6.1 million barrels and distillate stocks fell 4.6 million barrels.

Official inventory data from the Energy Information Administration was due later Wednesday.

Saudi Arabia cut the price of its main oil grade for Asian buyers in June, though prices remain elevated due to ongoing Middle East supply disruptions.

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