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Oil Prices Drop 5 Percent on Hopes of Hormuz Reopening
(MENAFN) Crude oil prices extended a sharp decline on Thursday as growing optimism over a potential Middle East peace deal tempered fears of prolonged supply disruptions and fueled expectations that the Strait of Hormuz could gradually reopen to commercial traffic.
International benchmark Brent crude futures tumbled nearly 5% to $96.50 per barrel as of 12:55 GMT, while the US benchmark West Texas Intermediate (WTI) shed 4.8%, dropping to $90.50 per barrel.
The broad selloff was triggered by reports that Washington had transmitted a one-page memorandum of understanding to Tehran via Pakistani intermediaries, outlining a framework to formally end hostilities and restore phased passage through the vital shipping corridor. Iran is expected to issue a response within days after acknowledging it is actively reviewing the proposal, though negotiations over Tehran's nuclear program are anticipated to proceed on a separate track at a later date.
US President Donald Trump, however, moved to temper expectations, cautioning that it would be a "big assumption" to expect Iran to accept the terms. He further warned that Washington retains the option to resume military strikes should Tehran fail to comply.
Oil markets faced additional headwinds after Trump abruptly reversed course on plans to deploy US forces to protect commercial vessels navigating the Strait of Hormuz. The policy reversal came after a key Gulf ally suspended US military access to its bases and airspace for the operation, media reported Wednesday, citing sources familiar with the matter.
The combined developments reinforced market expectations that Washington may be pivoting away from military intervention and toward a diplomatic resolution — a shift that significantly reduces the risk of a broader breakdown in one of the globe's most strategically vital energy arteries.
The Strait of Hormuz serves as the world's single most critical chokepoint for oil and liquefied natural gas exports, and weeks of regional conflict had already sent crude prices sharply higher on fears of acute supply shortages.
International benchmark Brent crude futures tumbled nearly 5% to $96.50 per barrel as of 12:55 GMT, while the US benchmark West Texas Intermediate (WTI) shed 4.8%, dropping to $90.50 per barrel.
The broad selloff was triggered by reports that Washington had transmitted a one-page memorandum of understanding to Tehran via Pakistani intermediaries, outlining a framework to formally end hostilities and restore phased passage through the vital shipping corridor. Iran is expected to issue a response within days after acknowledging it is actively reviewing the proposal, though negotiations over Tehran's nuclear program are anticipated to proceed on a separate track at a later date.
US President Donald Trump, however, moved to temper expectations, cautioning that it would be a "big assumption" to expect Iran to accept the terms. He further warned that Washington retains the option to resume military strikes should Tehran fail to comply.
Oil markets faced additional headwinds after Trump abruptly reversed course on plans to deploy US forces to protect commercial vessels navigating the Strait of Hormuz. The policy reversal came after a key Gulf ally suspended US military access to its bases and airspace for the operation, media reported Wednesday, citing sources familiar with the matter.
The combined developments reinforced market expectations that Washington may be pivoting away from military intervention and toward a diplomatic resolution — a shift that significantly reduces the risk of a broader breakdown in one of the globe's most strategically vital energy arteries.
The Strait of Hormuz serves as the world's single most critical chokepoint for oil and liquefied natural gas exports, and weeks of regional conflict had already sent crude prices sharply higher on fears of acute supply shortages.
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