Brent falls below $95 a barrel as hopes for US-Iran deal send oil prices tumbling

Oil prices are falling sharply this afternoon, with North Sea Brent dropping below $95 a barrel. The decline follows a report by Iranian state television that a possible deal with the United States could reopen the shipping route through the Strait of Hormuz, Reuters reported.

Shortly before 14:45 CEST, Brent was down 4.7 percent, trading at less than $94.90 a barrel. The price of US West Texas Intermediate (WTI) crude was down 5.7 percent at $88.50.

According to Iranian state television, if a memorandum of understanding with the United States is signed, Tehran would stop disrupting shipping in the Strait of Hormuz. The United States, in turn, would withdraw its military forces from the vicinity of Iran and lift its blockade of Iranian ports. The broadcaster claims to have obtained a draft of an initial, unofficial framework for the memorandum being negotiated to end the war, Reuters reported.

The framework agreement does not cover military vessels and envisages Iran managing commercial shipping through the key strait in cooperation with Oman. The final version of the memorandum has not yet been completed, however, and the Islamic Republic will take no steps without “tangible verification,” the broadcaster added.

The emerging memorandum of understanding between the United States and Iran stems from indirect talks that began in April after a ceasefire was reached in the current war, which the United States and Israel launched with airstrikes on Iran in late February. Tehran responded to the strikes with attacks on Gulf states and also largely blocked shipping through the Strait of Hormuz.

Before the war, about one-fifth of global supplies of oil, petroleum products and liquefied natural gas (LNG) passed through the key strait, as did around one-third of the world’s seaborne trade in agricultural fertilizers.

Oil prices in dollars per barrel (about 159 litres)