Global oil prices extended their sharp decline on Thursday, with Brent crude falling below the $100-a-barrel mark as investors reacted to renewed hopes of a possible peace agreement between the United States and Iran.
Markets also responded to reports suggesting progress toward a gradual reopening of the Strait of Hormuz, a critical route for global oil shipments.
Brent crude futures dropped $2.50, or 2.5%, to $98.77 a barrel by 1107 GMT.
Meanwhile, U.S. West Texas Intermediate (WTI) crude fell $2.47, or 2.6%, to $92.61 per barrel.
Thursday’s trading session remained highly volatile, with Brent prices swinging from gains of 1% earlier in the session to losses of nearly 4%.
Both major oil benchmarks had already plunged more than 7% on Wednesday, touching their lowest levels in two weeks.
The decline in oil prices accelerated after reports emerged suggesting progress in efforts to reduce tensions in the Middle East.
Saudi Arabia’s Al Arabiya reported that understandings had been reached to ease the U.S. blockade in exchange for a gradual reopening of the Strait of Hormuz.
At the same time, Israel’s Channel 12 reported that Iran had agreed to transfer its stockpile of 60% enriched uranium to a third country.
However, the contents of both reports could not be independently verified.
According to Priyanka Sachdeva, oil markets have remained trapped between hopes of diplomacy and fears of disruption for more than two months.
“From a broader perspective, oil markets have remained stuck between diplomacy and disruption for more than two months, with investors' emotions being manipulated by headlines almost daily,” she said.
Sachdeva warned that oil prices could fall sharply if a formal agreement is reached and geopolitical risk premiums disappear from the market.
At the same time, she noted that any renewed attacks on oil infrastructure or further escalation in the region could quickly send crude prices soaring again.
Iran reviewing US peace proposal
Iran said on Wednesday that it was reviewing a U.S. peace proposal aimed at formally ending the conflict.
According to sources, the proposal would stop the war but still leave major disagreements unresolved, including Washington’s demands that Iran suspend its nuclear programme and reopen the Strait of Hormuz.
The Strait of Hormuz is considered one of the world’s most important oil transit chokepoints, carrying a significant portion of global crude exports.
Oil prices have remained highly sensitive to developments in the Middle East due to fears that regional conflict could disrupt supply routes and energy infrastructure.
Any signs of progress in diplomacy between the U.S. and Iran tend to ease concerns about supply disruptions, pushing prices lower.
Conversely, renewed conflict or threats to shipping lanes could rapidly reverse the recent decline in prices.
