Oil Prices Drop After US-Iran Peace Deal Reports Raise Hopes for Hormuz Reopening

TLDR

• West Texas Intermediate crude fell as much as 5.1% to a near two-month low on peace deal hopes
• European gas futures dropped as much as 8.4% on the same news
• A 14-point draft deal between the US and Iran reportedly includes lifting oil sanctions
• Trump said a signing could happen as early as this weekend, with VP JD Vance attending
• The Strait of Hormuz, through which one-fifth of global oil passes, could reopen within 30 days under the deal

Oil prices dropped sharply on Friday after reports emerged that the United States and Iran may be close to finalising a peace deal that could end months of conflict and ease disruption to global energy supplies.

West Texas Intermediate crude fell as much as 5.1%, hitting its lowest level in nearly two months. European gas futures dropped as much as 8.4% on the same news.

The moves came after Iran’s semi-official Mehr News Agency reported that a 14-point draft deal had been agreed between the two countries. The deal reportedly includes the lifting of US oil sanctions on Iran.

The report said the agreement still needs approval from Iranian authorities. It also said US forces would withdraw from the area near Iran and that the Strait of Hormuz would reopen within 30 days.

What Trump Said

President Trump told reporters in the Oval Office that a signing could happen as early as this weekend in Europe. He said Vice President JD Vance would attend if the deal moves forward.

Trump also said Iran’s supreme leader had agreed to a deal, but added that the agreement was not yet final. He called off previously announced strikes on Iran following the talks.

Trump has said a deal with Iran was close many times before. None of those earlier predictions resulted in a signed agreement.

Why the Strait of Hormuz Matters

The Strait of Hormuz is one of the most important shipping routes in the world. About one-fifth of the world’s oil passes through the waterway.

Iran had said the strait would be closed to all ships following the latest hostilities. That threat helped push oil prices higher in recent weeks.

Risks to shipping in the area remain. Fox News reported that US forces shot down two Iranian attack drones overnight that appeared to be targeting commercial vessels.

Despite the threats, the number of vessels leaving the Strait of Hormuz has increased in recent weeks.

At 2335 GMT on June 11, front-month WTI crude oil futures were trading at $85.94 per barrel, down 2.0%.

ANZ Research analysts said the de-escalation raised hopes of easing disruption to oil supplies in the region.

One market analyst, Haris Khurshid of Karobaar Capital LP in Chicago, said the market appeared to be betting that both sides have more to lose from failure than from compromise. He added that this did not mean a deal was close, but that the market no longer saw a breakdown as the most likely outcome.

The deal has not been signed. Final details still need to be completed in the coming days, according to the White House.

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