Oil prices plunged on Wednesday on optimism that the United States and Iran are close to a deal to end the conflict that has caused the worst energy supply disruption in history.
international benchmark brent Crude oil futures were down about 6% at $103.23 a barrel as of 8:19 a.m. ET. Prices fell below $100 early in the session. us west texas intermediate Meanwhile, futures fell nearly 7% to $95.22.
Two U.S. officials and two others briefed on the matter told Axios they believe the White House is close to a one-page, 14-point memorandum of understanding to end the war and establish a more detailed framework for nuclear talks.
But President Donald Trump on Wednesday expressed doubts that a deal would be reached. President Trump said it was “probably a big assumption” to think Iran would accept the offer. He threatened to resume military strikes if Iran did not agree.
“If they don’t agree, the bombing will begin and sadly it will be at a much higher level and intensity than before,” President Trump said in a social media post.
According to the Axios report, the US expects Iran to respond on several key points within the next 48 hours. Although nothing has been agreed yet, officials told Axios that this is the closest Washington and the Iranian government have come to a deal since the war began on February 28.
Iran’s Foreign Ministry spokesperson told CNBC that it “appreciates” Washington’s peace plan. Iran said earlier Wednesday that it would only accept a “fair” peace deal.
President Trump announced on Tuesday that he would temporarily halt Project Freedom, a military operation launched the day before to escort commercial ships transiting the Strait of Hormuz. President Trump noted the progress in negotiations with Iran toward a final agreement.
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The Trump administration announced that about 23,000 sailors from ships from 87 countries are stranded in the Persian Gulf due to Iran’s de facto blockade of the strait.
“A deal to normalize the flow of oil through the Strait of Hormuz is extremely important,” Warren Patterson, head of product strategy at Dutch bank ING, said in a research note.
“The supply disruption of approximately 13 million units per day has been largely offset by inventories, which are clearly declining rapidly. This is making the market more vulnerable by the day. Tighter inventories will only make oil market trading even more volatile,” he added.
Nicolo Botchin, co-head of fixed income at Azimut Group, warned that soaring oil and energy prices were already causing demand destruction globally, adding that even if waterways reopened, it would still take “many weeks” for shipping and trade flows to normalize.
