Crude Oil Tumbles Over 2% as U.S.-Iran Peace Agreement Nears Completion

TLDR

• Brent crude declined more than 2% to $99.11 per barrel; WTI retreated to $93.08 during Thursday’s session
• Wednesday saw both oil benchmarks plunge over 7% as diplomatic optimism intensified
• Multiple sources indicate Washington and Tehran are finalizing a brief memorandum to conclude hostilities
• The agreement reportedly includes phased reopening of the Strait of Hormuz, a chokepoint for approximately 20% of worldwide petroleum shipments
• Weekly U.S. crude stockpiles decreased by 2.3 million barrels, falling short of the anticipated 3.4 million barrel reduction

Crude oil benchmarks tumbled for a second consecutive session Thursday, building on Wednesday’s dramatic selloff, as diplomatic momentum accelerated between Washington and Tehran toward an agreement that could restore access to a critical global petroleum transit corridor.

Brent crude declined $2.16, representing approximately 2.1%, settling at $99.11 per barrel. U.S. West Texas Intermediate decreased $2 to reach $93.08. The downturn followed Wednesday’s sharp retreat of more than 7% for both benchmarks, marking their lowest levels in two weeks.

Market sentiment shifted primarily due to multiple emerging reports indicating that the United States and Iran are nearing consensus on a concise memorandum of understanding that would officially terminate current hostilities.

Axios reported that administration officials in Washington anticipated Tehran’s formal response within the next 48 hours. CNN indicated Iranian leadership was expected to deliver their answer to the American proposal by Thursday. Iran’s foreign ministry spokesperson publicly acknowledged that Tehran would transmit its response through established mediators.

Saudi outlet Al Arabiya additionally reported that negotiators from both nations had achieved preliminary understandings to reduce the American blockade of Iranian port facilities in return for a staged reopening of the Strait of Hormuz. Reuters was unable to independently confirm these specific details.

The Strait of Hormuz represents one of the planet’s most strategically vital petroleum shipping corridors. Approximately 20% of worldwide oil commerce transits through this narrow waterway. Any obstruction or restoration of navigation there immediately impacts global energy supplies and market pricing.

Earlier in the week, American military forces temporarily suspended operations aimed at restoring commercial vessel passage through the strait following forceful Iranian countermeasures.

Diplomatic Progress Fuels Market Volatility

Energy markets have demonstrated extreme sensitivity to each development emerging from ongoing negotiations. Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that petroleum markets have remained “stuck between diplomacy and disruption for more than two months.”

Sachdeva suggested that a formalized agreement could trigger oil prices to decline precipitously as geopolitical risk premiums evaporate from market calculations.

Analysts at ING stated that any settlement restoring normal Hormuz traffic patterns would substantially diminish supply-risk premiums embedded in current pricing, though any postponement or setback could rapidly reverse price declines.

U.S. Treasury Secretary Scott Bessent encouraged Chinese leadership this week to leverage their influence with Tehran to expedite the strait’s reopening. He indicated that President Trump and Chinese President Xi Jinping would address this matter directly during their scheduled meeting next week.

Hiroyuki Kikukawa of Nissan Securities Investment observed that diplomatic negotiations would probably continue at minimum until the U.S.-China summit concludes, though the trajectory beyond that timeframe remains highly uncertain.

U.S. Inventory Data Limits Recovery

Weekly petroleum inventory statistics released by the Energy Information Administration provided modest support for crude prices. Domestic crude reserves decreased by 2.3 million barrels during the week ending May 1, reaching 457.2 million barrels total.

Market analysts had projected a more substantial withdrawal of 3.4 million barrels, meaning the smaller-than-forecast decline prevented any meaningful price rebound.

Gasoline stockpiles contracted by 2.5 million barrels. Distillate inventories, encompassing diesel fuel and heating oil, dropped by 1.3 million barrels.

The EIA data also highlighted robust U.S. petroleum export volumes, signaling sustained international appetite for American energy products while Middle Eastern supply flows remain compromised.

Tehran announced Wednesday that it was conducting a thorough review of the American proposal, which according to diplomatic sources would formally conclude military confrontations but would not resolve several key American stipulations, including demands that Iran halt its nuclear enrichment activities.

The post Crude Oil Tumbles Over 2% as U.S.-Iran Peace Agreement Nears Completion appeared first on Blockonomi.