$100 Brent Breaks On Iran Peace Hopes

Oil Markets Whipsaw on Peace Deal Reports

Brent crude fell sharply below $100 per barrel on Wednesday after reports that the United States and Iran are moving closer to a short memorandum of understanding to end their conflict. The price of Brent crude dropped nearly 12% to below $100 per barrel, while WTI crude oil closed down 7% at $95.08 per barrel and Brent settled 7.8% lower at $101.27 per barrel. The conflict began on February 28, with crude trading around $70 a barrel before the war began, before reaching highs of $126 last week.

The sell-off followed an Axios report that the US and Iran were close to a one-page, 14-point memorandum of understanding that would end the war and establish a framework for further negotiations, with Washington expecting responses from Tehran on several key points within 48 hours. A Pakistani source involved in the peace efforts confirmed to Reuters that the two sides were closing in on the memo.

What the Framework Involves

The document would declare an end to the war while triggering a 30-day negotiation period on resolving sticking points, including nuclear issues, unfreezing Iranian assets and future security in the Strait of Hormuz. The duration of the moratorium on uranium enrichment is being actively negotiated, with three sources saying it would be at least 12 years and one putting 15 as a likely landing spot. Among other provisions, the deal would involve Iran committing to a moratorium on nuclear enrichment, the US agreeing to lift sanctions and release billions in frozen Iranian funds, and both sides lifting restrictions on transit through the Strait of Hormuz.

The virtual closure of the waterway has stranded about 20,000 seafarers, according to the International Maritime Organization, with around a fifth of the world's oil, or 20 million barrels a day, normally passing through the strait. The broader market reaction was positive: the S&P 500 rose 1.3%, the Nasdaq Composite jumped 1.8%, and the Dow Jones Industrial Average traded up by almost 620 points.

The rally in risk assets cooled hours later. Trump told the New York Post that it was still "too soon" to start thinking about another round of in-person peace talks with Iran. He also renewed warnings, saying Tehran should agree to his terms or "the bombing starts, and it will be, sadly, at a much higher level and intensity than it was before." Brent and WTI both clawed back some of their earlier losses after his comments. The White House believes the Iranian leadership is divided and it may be hard to forge consensus across different factions, and some US officials remain skeptical that even an initial deal will be reached.

Sources:
CNN: Iran reviewing US proposal as both sides move toward memo to end war
CNBC: Trump says Iran will be bombed at a higher level if it doesn't agree to peace deal
NBC News: Oil plunges on report US and Iran near deal to end war