Oil slides on US-Iran deal hopes; Brent drops over 8% to one-month low

Global oil prices extended losses on Wednesday after renewed optimism over a potential US.-Iran agreement eased fears of prolonged supply disruptions in the Strait of Hormuz, a critical artery for global energy trade.

Brent crude futures fell more than 8 per cent to hover around $100 per barrel, marking their lowest level in nearly a month. U.S. crude prices also saw a sharp decline, reflecting a broader market reaction to signs of de-escalation in geopolitical tensions.

The sell-off was triggered by reports suggesting that Washington and Tehran are inching closer to a framework agreement that could end hostilities and pave the way for reopening the Strait of Hormuz. The narrow waterway accounts for over a fifth of global oil shipments and has been severely disrupted in recent weeks due to conflict-related threats and attacks.

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Markets responded swiftly to the prospect of improved supply flows. Oil, which had surged more than 40 per cent since the onset of the conflict, reversed course as traders priced in reduced risk premiums. The decline in crude prices also spilled over into refined products, with wholesale fuel prices falling and offering potential relief to consumers.

The diplomatic progress follows signals from both sides indicating willingness to negotiate. The US administration has paused certain military-linked maritime operations in the region, while Iranian officials have hinted at openness to a “fair and comprehensive” agreement.

The easing of oil prices has also buoyed global equities, with stock markets rallying on expectations that lower energy costs could ease inflationary pressures and support economic growth.

However, analysts caution that volatility may persist. While optimism over a deal has improved sentiment, the situation in the Strait of Hormuz remains fragile, and any disruption could quickly reverse the downward trend in prices.