Oil drops sharply on hopes of US-Iran peace deal

• Brent and WTI down almost 5%
• Trump says pact ‘largely negotiated’
• US president says no rush for a deal

Oil prices fell almost 5 percent early on Monday on optimism that the US and Iran were nearing a peace deal and as Tehran said 33 vessels crossed the Strait of Hormuz the previous day.

Brent crude futures were down around 4.8 percent at $98.70 a barrel by 02:53 GMT, while US West Texas Intermediate fetched $91.94 a barrel, losing 4.7 percent. Both benchmarks reached their lowest since May 7.

US President Donald Trump said on Sunday that negotiations with Iran were proceeding in an orderly and constructive manner.

“I have informed my representatives not to rush into a deal in that time is on our side. The Blockade will remain in full force and effect until an agreement is reached, certified, and signed,” he said in a post on Truth Social.

He added that the US relationship with Iran was becoming “a much more professional and productive one”.

“They must understand, however, that they cannot develop or procure a Nuclear Weapon or Bomb,” he said.

Trump said on Saturday that Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz, which normally carried 20 percent of global oil and gas supplies but has been all but closed since the war started on February 28.

“Notwithstanding all the caveats and risks that remain to the peace deal and Strait of Hormuz, there is now some light at the end of the tunnel, which will bring some near-term oil price relief,” Reuters quoted Saul Kavonic, an analyst at Australian financial services company MST Marquee, as saying.

Meanwhile, Iran’s Tasnim news agency said the US was still obstructing parts of a potential deal, including Tehran’s demand for the release of frozen funds.

Iran’s Islamic Revolutionary Guards Corps Navy said on Sunday that 33 vessels had crossed the strait over the past 24 hours after obtaining approval.

The vessels included oil tankers and container ships that transited the strategic waterway with coordination and security protection provided by Iran, the news agency said.

Further reading:

• UAE’s Al Jaber says oil supply will take months to recover
• Frank Kane: The Strait of Hormuz may never truly reopen
• Demand for oil severely outstrips supply, IEA warns