Oil prices plunged to $89 a barrel Wednesday following reports that the proposed Iran-US peace deal would see the Strait of Hormuz being reopened in just one month.
Crude futures were at more than $107 a barrel just over a week ago.
The new fall, a 5.6% drop, came as the market held out hopes for a peace deal to bring the four-month conflict to an end.
One of the major driving factors appeared to be an Iranian state TV report on Wednesday on a draft of an initial, unofficial framework for a memorandum of understanding (MOU) with the US on ending the conflict.
Under the MOU, Iran would restore commercial shipping through the strait — which carried 20% of the world’s oil supply before the war — within a month, while the US would withdraw its forces from around Iran, and lift its naval blockade.
The framework is not yet finalized — and President Trump appeared to tap the brakes on a possible deal after allies in Congress voiced concerns that it did not address Iran’s nuclear program.
Iran’s regime has insisted it would take no steps without “tangible verification,” according to state TV.
Prices have fluctuated significantly in recent weeks amid uncertainty over the ongoing peace talks — but Wednesday’s price for West Texas Intermediate was the lowest in more than a month.
“When there’s so much uncertainty, traders have to develop a thesis around what they think is going to happen,” John Deal, managing director of capital markets at Post Oak Group, told the Wall Street Journal.
“Right now we’re in this really binary situation where if they make a deal prices are going to fall back down, if they don’t make a deal we might not have reached the ceiling yet,” he added.
Other analysts have said they remain skeptical that Iran will keep up its end of the bargain.
“We’ve routinely gotten close and then collapsed on the details multiple times over the past couple of months, and Hormuz remains closed,” Rory Johnston, founder of the Commodity Context newsletter, told industry outlet Ship & Bunker.