Oil falls below $100 on hopes of Iran war deal

• Possibly close to MoU
• Brent loses 9%
• WTI down 10%

Oil prices briefly dropped below $100 a barrel on Wednesday following reports that the US and Iran were closing in on a memorandum of understanding to end their war and Tehran indicated the Strait of Hormuz could reopen. 

Global benchmark Brent crude was down 9 percent at $100 by 11:20 GMT, off lows around $97 less than an hour before. 

West Texas Intermediate crude fell 10 percent to $92 a barrel. 

Iran’s navy said on social media that safe passage through the strait would be “ensured”.

The virtual closure of the waterway has sent oil prices soaring and stranded about 20,000 seafarers, according to the International Maritime Organization. 

Around a fifth of the world’s oil, or 20 million barrels a day, usually passed through the strait. 

Crude was trading at about $70 a barrel before the war began on February 28, but reached highs of $126 last week. 

The conflict has also increased the price of gasoline and jet fuel, leading airlines to cancel thousands of flights this summer. 

The White House believes it is close to signing a one-page memorandum of understanding, US news site Axios reported. 

It cited several sources saying an MoU to end the war would set a framework for more detailed nuclear negotiations. 

Vijay Valecha, chief investment officer at brokerage Century Financial, said: “The blockade on Iranian oil exports remains, and ship traffic through the strait is still constrained. This indicates there is no meaningful change in the ongoing supply disruption, and oil prices are lower mostly on positive sentiment around possible de-escalation.”

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“The supply recovery is inherently delayed… inventories fell 8.1 million barrels last week, which would be the biggest draw since mid-February if confirmed by official EIA [US Energy Information Administration] data due later today,” he added.

Progress towards a deal comes less than a day after US President Donald Trump said he would pause “Project Freedom”, an operation to escort commercial ships through the strait.

The operation had led to an escalation in Iranian attacks, including a wave of strikes on the UAE. A large fire broke out at the Fujairah Oil Industrial Zone following a drone strike on Monday.