Oil briefly dropped below $100 a barrel and gas slumped, as Iran evaluated a new proposal from the US to end their near 10-week war.
Benchmark Brent fell as much as 12 per cent to $96.75 a barrel in London, while West Texas Intermediate dropped up to 13 per cent. European natural gas plunged as much as 14 per cent. Oil and gas later pared about half of those losses after Trump said in a Truth Social post on Wednesday that if Iran doesn’t agree, “the bombing starts.”
Washington’s one-page memorandum of understanding will, if Iran accepts it, lead to the gradual reopening of the Strait of Hormuz and lifting of the American blockade on Iranian ports, according to a person familiar with the matter. Nothing has yet been agreed, the person said, and detailed negotiations on Iran’s nuclear programme will come later in the process.
News of the potential breakthrough — reported earlier by Axios — came as US President Donald Trump faces increasing pressure to end the war he started alongside Israel at the end of February. China added its voice to global diplomatic pressure to wrap up the conflict, just two days after clashes in the critical strait drove oil higher and raised fears that a US-Iran ceasefire was falling apart.
Iran is expected to send a response to the US proposal via mediator Pakistan in the next two days, the person said.
Part of the plan reported by Axios “contains excessive and unrealistic proposals which have been strongly rejected by our country’s authorities in recent days,” Iran’s semi-official Iranian Students’ News Agency reported, without saying where it got the information.
“The oil price is reacting on shift in sentiment instead of market balances, driven by news of a potential deal between the US and Iran,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “It remains unclear when flow through the strait would resume.”
Crude has climbed by about 40 per cent since the conflict started at the end of February, cutting off hundreds of millions of barrels of Persian Gulf oil from global markets. Flows through the chokepoint have been constrained by a double blockade, with Tehran obstructing shipping while the US is stopping vessels from accessing Iranian ports.
On Wednesday, Iran said safe passage through Hormuz would be ensured under a new protocol.
At a meeting in Beijing, China’s Foreign Minister Wang Yi urged Iranian counterpart Abbas Araghchi to keep negotiating, saying “a resumption of hostilities is inadvisable.” That comes before Trump’s expected summit with China’s President Xi Jinping on May 14-15.
On Tuesday, Trump said that the US would pause an effort to escort ships through Hormuz to see if a deal can be reached with Iran. Trump said that decision was made at the request of Pakistan — which is helping mediate talks between Washington and Tehran — as well as other countries.
Before Trump’s announcement, Secretary of State Marco Rubio told reporters at the White House that offensive operations against Iran were over.
Trump has repeatedly said significant progress has been made in negotiations with Iran to end the war, only for nothing substantial to emerge. On Tuesday, Iran’s President Masoud Pezeshkian called the US position unrealistic, saying Tehran wouldn’t “ultimately submit to its unilateral demands.”
Also on Tuesday, Washington played down the prospect of a return to active war, with Defense Secretary Pete Hegseth confirming the truce that began just under a month ago is still in place. Meanwhile, General Dan Caine, the chairman of the Joint Chiefs of Staff, said attacks by Iran on vessels in the Persian Gulf and energy infrastructure in the United Arab Emirates didn’t constitute a breach of a ceasefire.
The shutdown around Hormuz has left more than 1,550 commercial vessels, carrying some 22,000 sailors, trapped in the Persian Gulf, Caine said.
Still, any breakthrough in peace talks will take much longer to filter through to energy markets.
“When the Strait opens we do believe it will take half a year for oil to get back to normal,” Equinor Chief Financial Officer Torgrim Reitan said on the company’s quarterly earnings conference call. “For gas, it will take much longer.”
The effective closure of Hormuz has choked off a fifth of the world’s liquefied natural gas. While most of that fuel would normally go to Asia, the disruption threatens to intensify competition for a limited global pool of seaborne supply as Europe refills gas inventories before next winter.
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Published on May 7, 2026