Oil prices registered a significant decline after Iranian media reported that Tehran had agreed to increase commercial shipments through the Strait of Hormuz within a month if a deal with the United States is finalized. Market participants responded swiftly, sending U.S. and international crude benchmarks lower.
By late night on Wednesday of the Asian trading session, the price of West Texas Intermediate futures fell more than 4.42% to $89.74 per barrel. Brent crude, the global standard, fell 4.13%, trading at $95.47 per barrel. The drop followed a broadcast from Iranian state media announcing preliminary terms of a “Memorandum of Understanding” for a peace agreement between Iran and the United States.
According to reports, Iran would resume commercial activity through the Hormuz Strait at pre-conflict volumes within a month, contingent on an agreement being reached with Washington.
Initial details of the deal per a report by Iranian media are as follows:
- US Military forces will withdraw from the vicinity of Iran
- The US Navy will lift its blockade of the Strait of Hormuz
- Iran has committed to restoring the number of commercial transit ships through the Strait of Hormuz to pre-war levels within 1 month
- Iranian state media says military vessels are not included in this draft agreement
- The management and routing of ship traffic through the Strait of Hormuz will be handled by Iran in cooperation with Oman
- If a final deal is reached within 60 days, this agreement will be approved in the form of a binding UN Security Council resolution
