TLDR
- Brent crude declined more than 2% to $99.11 per barrel; WTI slipped to $93.08 during Thursday trading
- Both oil benchmarks had previously plunged over 7% on Wednesday amid diplomatic optimism
- Multiple reports indicate Washington and Tehran are finalizing a brief memorandum to conclude hostilities
- A central element of the agreement involves phased reopening of the Strait of Hormuz, a passage for approximately 20% of worldwide oil shipments
- Weekly US petroleum stockpiles decreased by 2.3 million barrels, falling short of the forecasted 3.4 million barrel reduction
Crude oil benchmarks continued their downward trajectory on Thursday, building on significant declines from the previous session, as market participants reacted to increasing prospects of a diplomatic breakthrough between Washington and Tehran that could restore access to a vital energy transit corridor.
Brent crude decreased $2.16, representing approximately 2.1%, settling at $99.11 per barrel. US West Texas Intermediate declined $2 to reach $93.08. These benchmarks had previously tumbled more than 7% during Wednesday’s session, marking their lowest levels in two weeks.
The primary catalyst behind the selloff was a series of media reports indicating that the United States and Iran are approaching consensus on a concise memorandum of understanding that would officially terminate current hostilities.
Axios reported that administration officials in Washington anticipated receiving Iran’s formal response within a 48-hour timeframe. CNN indicated that Tehran was expected to deliver its reply to the American proposal by Thursday. A spokesperson from Iran’s foreign ministry confirmed that the country would transmit its response through diplomatic intermediaries.
Saudi Arabia’s Al Arabiya news outlet additionally reported that both nations had achieved preliminary understandings to reduce the US blockade of Iranian port facilities in return for a graduated reopening of the Strait of Hormuz. Reuters noted it could not independently confirm those specific details.
The Strait of Hormuz represents one of the planet’s most strategically significant petroleum shipping corridors. Approximately one-fifth of worldwide crude oil commerce transits through this narrow waterway. Any interruption or resumption of vessel traffic through the strait immediately influences global supply dynamics and pricing.
Earlier during the week, American military forces suspended an operation aimed at restoring commercial maritime traffic through the strait following Iran’s forceful response.
Peace Talks Drive Market Moves
Financial markets have demonstrated pronounced sensitivity to each development emerging from the ongoing negotiations. Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that petroleum markets have been “stuck between diplomacy and disruption for more than two months.”
She indicated that a formalized agreement could trigger oil prices to decline substantially as geopolitical risk premiums evaporate from market valuations.
Analysts at ING stated that an accord restoring normal Hormuz maritime operations would diminish supply-disruption premiums, though any postponement could rapidly elevate prices once again.
US Treasury Secretary Scott Bessent encouraged China this week to leverage its influence with Iran to facilitate reopening the strait. He revealed that President Trump and Chinese President Xi Jinping would address the matter during their scheduled meeting next week.
Hiroyuki Kikukawa of Nissan Securities Investment suggested peace negotiations are probable to continue at minimum until the US-China leadership summit, though the trajectory beyond that gathering remains uncertain.
US Inventory Data Limits Recovery
Weekly American petroleum inventory statistics from the Energy Information Administration provided modest price support. Crude oil reserves declined by 2.3 million barrels during the week concluded May 1, reaching 457.2 million barrels.
Market analysts had projected a more substantial withdrawal of 3.4 million barrels, so the smaller-than-anticipated decrease limited any potential price rebound.
Gasoline stockpiles contracted by 2.5 million barrels. Distillate inventories, encompassing diesel fuel and heating oil, fell by 1.3 million barrels.
The EIA data also revealed robust US petroleum export activity, suggesting sustained demand for American energy supplies while Middle Eastern energy flows remain constrained.
Iran stated on Wednesday it was examining the US proposal, which according to informed sources would formally conclude the conflict but leave unaddressed several key American demands, including Iran’s suspension of its nuclear enrichment activities.
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