Key facts
- Oil prices fell over 4% on Friday amid optimism for a U.S.-Iran peace deal.
- Brent crude dropped to $86.36 a barrel, and WTI crude fell to $83.88.
- A draft memorandum of understanding reportedly includes lifting U.S. sanctions and Iran opening the Strait of Hormuz.
- Final peace negotiations are contingent on the U.S. suspending oil sanctions, lifting a naval blockade, and releasing frozen funds.
- U.S. President Trump indicated a settlement had been reached, pending document finalization.
- Iran's Foreign Ministry cited contradictory U.S. positions as a cause for negotiation turbulence.
Oil prices tumbled more than 4% on Friday as market participants grew optimistic about progress toward a peace deal between the U.S. and Iran. Brent crude futures fell 4.34% to $86.36 a barrel, and West Texas Intermediate (WTI) crude dipped 4.47% to $83.88, with both benchmarks heading toward three-month lows.
This optimism stems from reports that a draft U.S.-Iran memorandum of understanding includes provisions for the U.S. to lift its blockade and Iran to open the Strait of Hormuz within 30 days. However, the draft also reportedly stipulates that final peace negotiations would only commence after the U.S. suspends oil sanctions on Iran, lifts its naval blockade outside Hormuz, and releases half of Iran's frozen funds.
U.S. President Donald Trump stated on Thursday that a "great settlement of the war with Iran" had been reached, pending finalization of documents. Conversely, Iran's Foreign Ministry spokesman Esmaeil Baghaei noted that while the text is largely finalized, contradictory U.S. positions have consistently disrupted the process, citing shifting demands and military actions during negotiations.
Earlier in the week, oil prices had risen following U.S. military strikes against Iranian targets near the Strait of Hormuz, which the U.S. described as self-defense after Iran allegedly downed an Apache helicopter. Iran denied shooting down the helicopter, calling the incident an accident. The earlier escalation had seen Brent crude rise 1.03% to $92.39 and WTI gain 0.91% to $89.00. Support for oil prices had also come from significant drawdowns in U.S. crude inventories, which fell by 9.12 million barrels last week, marking the eighth consecutive weekly decline.