Oil and Gas Prices Slump Amid Reports of US-Iran Nuclear Deal Progress

Global Oil and Gas Prices Plummet as US and Iran Close in on Deal

The global oil market experienced a significant downturn on Wednesday as Benchmark Brent crude fell by as much as 9.4% to $99.50 a barrel in London, while West Texas Intermediate dropped nearly 11%. European natural gas prices also plunged by as much as 11% as the market reacted to reports that the United States and Iran are close to reaching a deal to end the near 10-week war.

According to Axios, Washington and Tehran are on the verge of signing a one-page memorandum of understanding that would lift restrictions on the Strait of Hormuz, a critical chokepoint for global oil supplies. The US sees Iran responding within 48 hours, and President Donald Trump has announced that the US would pause efforts to escort ships through the strait to see if a deal can be reached.

The oil price drop is attributed to a shift in sentiment driven by news of a potential deal between the US and Iran, rather than changes in market balances. The Strait of Hormuz has been a major concern for the global oil market, with flows through the critical chokepoint constrained by a double blockade since the conflict began at the end of February. The blockade has cut off hundreds of millions of barrels of Persian Gulf oil from global markets.

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Crude prices have climbed by approximately 40% since the conflict started, and the shutdown around Hormuz has left more than 1,550 commercial vessels, carrying over 22,000 sailors, trapped in the Persian Gulf. The effective closure of Hormuz has also choked off a fifth of the world's liquefied natural gas, which would normally go to Asia.

The US and Iran's peace talks have been ongoing, with Pakistan Prime Minister Shehbaz Sharif serving as a mediator. China's top diplomat has also called for the swift reopening of the Strait of Hormuz, signaling Beijing's efforts to de-escalate the global crisis. The US has played down the prospect of a return to active war, with Defense Secretary Pete Hegseth confirming the truce that began just under a month ago is still in place.

Industry data showed that crude inventories fell by 8.1 million barrels last week in the US, which would be the biggest draw since mid-February if confirmed by official data. When the Strait of Hormuz finally opens, it is expected to take half a year for oil to return to normal, and even longer for gas to recover.

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