Key Points:
- Brent crude oil fell 6.8% to $102.45 a barrel while West Texas Intermediate dropped 6.4% to $95.69.
- The White House and Tehran are close to signing a 14-point agreement to end their ongoing conflict.
- President Donald Trump paused Project Freedom after Iran promised safe passage through the Strait of Hormuz.
- United States petroleum product exports reached a record high of 8.22 million barrels a day.
Oil prices dropped heavily on Wednesday after the United States paused a major military operation in the Middle East. Washington halted its naval mission to help commercial ships travel through the Strait of Hormuz after Iran’s navy guaranteed safe passage. News reports indicating that Washington and Tehran were moving closer to a final peace agreement also boosted market confidence.
Brent oil futures for July dropped 6.8% to $102.45 a barrel. Earlier in the trading session, the global crude benchmark fell below $100, hitting a low of $96.77. At the same time, United States West Texas Intermediate crude futures fell 6.4% to $95.69 a barrel. Both of these contracts closed almost 4% lower during the previous day.
White House officials told reporters they are close to reaching a formal deal with Iran. The two sides are looking at a one-page memorandum of understanding to end the war. United States officials claim this document will create a framework for deeper nuclear negotiations later. Other sources confirmed this 14-point plan gives both sides one full month to negotiate a total end to the conflict.
Under the potential deal, Washington expects Iran to stop its nuclear enrichment programs. In return, the United States will remove economic sanctions and release billions of dollars in frozen Iranian funds. The agreement will also lift current military restrictions in the Strait of Hormuz, allowing global shipping companies to move cargo freely through the critical waterway again.
President Donald Trump confirmed the progress on social media. He stated that the blockade will end and the Strait of Hormuz will be opened to all countries if Iran agrees to the negotiated terms. However, he warned that the United States military will launch heavier bombing campaigns if Iran rejects the deal. Trump later told reporters he felt the two sides were closing in on an agreement, possibly before he travels to China later this month. He noted the war has a very good chance of ending soon.
Iran is currently reviewing the new proposal. Foreign ministry spokesperson Esmaeil Baqaei said Tehran will send its official response to Pakistani mediators after leaders make a final decision. However, Iranian state media pushed back against some specific claims from Washington. Local news agencies dismissed the details of the nuclear talks as mere propaganda. They stated that the current negotiations focus only on ending the war, completely ignoring the nuclear issue for the time being.
Military tensions at sea are already cooling down. Trump officially paused Project Freedom on Tuesday. He originally launched this operation to protect commercial ships crossing the Strait of Hormuz, a move that immediately sparked an aggressive response from Iran. Trump said he paused the mission because Pakistan requested the delay, and because the recent military campaign against Iran achieved major success.
At the same time, Iran’s Islamic Revolutionary Guard Corps told global shipping companies they can safely cross the strait again. The military group thanked ship captains for complying with local regulations and stated that new security protocols will ensure safe travel. Iran’s mission to the United Nations added that ending the war and lifting the maritime blockade remain the only viable solutions to the crisis.
Energy analysts at ING stressed that the global market urgently needs normal oil flows through the Strait of Hormuz. They noted the conflict disrupted roughly 13 million barrels of oil a day. Energy companies are using existing inventory to make up for the missing oil, but those supplies are dropping fast. The analysts warned the oil market will become highly unstable if daily stocks continue to fall at this rapid pace.
New government data also grabbed market attention on Wednesday. The Energy Information Administration released its weekly petroleum status update, showing a steady drop in United States commercial crude oil supplies. Inventories fell by 2.3 million barrels during the week ending May 1, landing at a total of 457.2 million barrels. Analysts originally predicted a larger drop of 3.4 million barrels.
The new energy data highlighted massive export numbers from the United States. Crude oil exports hit 4.75 million barrels a day during the week ending May 1. Meanwhile, crude oil product exports reached a record high of 8.22 million barrels a day.
These record export numbers show the United States stepped up as a top global supplier during the Middle East conflict. With the Strait of Hormuz largely closed over the past weeks, countries across Asia and Europe have relied heavily on American oil to meet their daily energy needs.
