The decline came after Iranian state television claimed it had obtained a draft framework of an unofficial understanding between Washington and Tehran aimed at ending hostilities and reopening the Strait of Hormuz — one of the world’s most critical oil transit routes.
The development triggered renewed optimism in the energy market, with traders reacting quickly to signs that tensions in the Gulf region could begin to ease after months of confrontation.
Brent crude futures dropped by $3.66, representing a 3.7 per cent decline, to settle at $95.3 per barrel. U.S. West Texas Intermediate (WTI) crude also suffered a steep fall, losing $5.19, or 5.59 per cent, to trade at $88.70 per barrel.
The losses wiped out gains recorded earlier in the week when fears of escalating conflict had pushed prices higher. During intraday trading, Brent crude touched $94.16 while WTI fell to $87.77 per barrel — the lowest levels seen in more than a month.
Market analysts attributed the sharp decline largely to reports that tanker traffic through the Strait of Hormuz had begun increasing again, signalling a possible easing of restrictions around the strategic waterway.
Iranian state media reported that under the proposed understanding, the United States would withdraw military forces from areas close to Iran and remove its naval blockade, while Iran, in cooperation with Oman, would oversee ship traffic through the Strait.
The Strait of Hormuz remains a crucial artery for global energy supplies, handling a significant portion of the world’s oil exports. According to the International Energy Agency (IEA), Iran’s effective closure of the passage had forced more than 14 million barrels of Middle East oil supply per day offline during the crisis.
The latest market reaction contrasted sharply with Tuesday’s surge in prices after the United States reportedly launched fresh strikes inside Iran, dimming hopes of an immediate diplomatic breakthrough.
Despite the renewed optimism, uncertainty continued to cloud the situation as the White House swiftly dismissed the Iranian media report, describing the alleged memorandum of understanding as false.
“This report from Iranian controlled media is not true and the MOU they ‘released’ is a complete fabrication. Nobody should believe what the Iranian state media is putting out. Facts Matter,” the White House Rapid Response account stated in a post on X.
Still, some elements contained in the Iranian report appeared consistent with comments previously made by American officials regarding ongoing negotiations.
Sources close to the discussions indicated that President Donald Trump’s administration could consider lifting the blockade if Iran guarantees unrestricted movement for commercial vessels through the Strait of Hormuz.
Responding to the controversy surrounding the reported draft agreement, White House spokeswoman Olivia Wales maintained that diplomatic talks were ongoing but insisted Washington would not compromise on security concerns.
“As President Trump has said, negotiations are proceeding nicely and he has made his redlines clear. President Trump will only make a good deal for the American people, which must ensure that Iran can never have a nuclear weapon,” Wales said.
President Trump also reiterated that any eventual deal would ensure open access to the Strait for all nations and rejected suggestions that the United States was considering easing sanctions on Tehran.
The conflict between both countries has rattled global energy markets for months, with investors closely monitoring every signal from Washington and Tehran for indications of either escalation or reconciliation.
Although the latest reports sparked temporary relief across oil markets, analysts warned that volatility could persist until a formal and verifiable agreement is reached between both sides.