Crude oil prices experienced a significant decline in North American trading on Wednesday, driven by market reactions to signals from both the United States and Iran suggesting a forthcoming deal to end the war. The potential agreement could lead to the reopening of the Strait of Hormuz, a critical maritime chokepoint for global oil shipments.

Price Movements

Futures for both Brent and West Texas Intermediate (WTI) crude dropped approximately 5% during the day. WTI futures fell below $90 per barrel, marking a nearly 9% decline for the week. Brent futures settled just under $95 per barrel, representing a weekly drop of nearly 10%. Additionally, European natural gas prices decreased by about 3.4%.

Negotiation Developments

US President Donald Trump indicated to reporters at the White House that negotiations with Iran were progressing well, with both sides converging on an agreement to reopen the Strait of Hormuz and end a US Navy blockade of Iranian ports. Iranian state television also reported that a deal to reopen the strait could be imminent. Trump insisted that any final agreement would ensure the Strait of Hormuz remains as open to shipping traffic as it was before the war began on 28 February, stating, "It's international waters. Nobody's going to control it." He added that the US would oversee the strait but not control it, as part of the negotiation.

Key Sticking Point

A remaining obstacle in the negotiations appears to be the fate of Iran's enriched uranium. Trump has stated on social media that it should be destroyed or turned over to the US for destruction, though he has hinted at accepting the uranium being shipped to a third party. However, he told reporters that diverting the uranium to Russia or China "would not make me comfortable."

Outlook

Despite maintaining a hard line on Iran's enriched uranium and the future status of the strait, Trump expressed optimism that an agreement to end the war was imminent. He attributed this to dealing with "a totally different group of people than we were at the beginning," whom he described as "much more reasonable" and "smarter."