Oil prices extended their losses on Thursday as investors assessed the possibility of a Middle East peace agreement that could reduce supply risks and potentially allow for the gradual reopening of the Strait of Hormuz.

International benchmark Brent crude dropped 3.5% to $97.5 per barrel as of 0715GMT, while the US benchmark West Texas Intermediate (WTI) fell by more than 3% to $92 per barrel, News.Az reports, citing Anadolu.

The decline came after reports indicated that the United States had sent a one-page memorandum of understanding to Iran via Pakistani intermediaries.

The document is aimed at formally ending the conflict and establishing a framework for the gradual reopening of the Strait of Hormuz.

Iran is expected to respond within several days after confirming that it is reviewing the US proposal, although broader negotiations regarding Iran’s nuclear program are reportedly expected to take place at a later stage.

However, US President Donald Trump cautioned that no deal has yet been finalized, stating that it would be a “big assumption” to believe Iran would accept the proposal. He also warned that the United States could resume military strikes if Tehran does not comply.

Oil prices were additionally pressured after Trump temporarily reversed his plan to support commercial vessels passing through the Strait of Hormuz.

According to NBC News, citing sources, Trump’s sudden reversal followed a decision by a key Gulf ally to suspend the US military’s use of its bases and airspace for the operation.

The development increased expectations that Washington may be shifting away from military measures toward diplomacy, easing concerns about further disruptions in one of the world’s most important energy transit routes.

The Strait of Hormuz remains a critical chokepoint for global oil and liquefied natural gas flows. Weeks of tensions in the region had previously driven oil prices sharply higher due to fears of supply shortages.

News.Az 

By Nijat Babayev