Global oil prices declined sharply in early Asian trading on Monday after reports indicated that negotiations to reopen the Strait of Hormuz were nearing completion.
Both major oil benchmarks dropped by more than five per cent, with Brent crude falling below $100 per barrel to trade at $98.81, while WTI crude declined to $92.06.
Market optimism followed reports that a proposed agreement aimed at reopening the Strait of Hormuz and easing tensions in the Middle East was in its final stages.
However, uncertainty remained after Donald Trump stated on social media that negotiators should “not rush into a deal.” A senior U.S. administration official later clarified that although progress had been made, no agreement was expected to be signed on Sunday.
The proposed deal is expected to focus on reopening the Strait of Hormuz, ending the ongoing conflict, and securing Iran’s commitment to give up its enriched uranium programme.
Under the first phase of the agreement, a 60-day ceasefire extension would allow shipping traffic to resume through the Strait while further nuclear negotiations continue.
Iranian news agency Tasnim reported that vessel traffic through the strategic waterway could return to pre-war levels within 30 days if the agreement is finalized.
The proposed arrangement is also expected to include an end to hostilities between Israel and Hezbollah, although Benjamin Netanyahu maintained that any final agreement must eliminate what he described as the “nuclear danger” posed by Iran.
Spokesperson for Iran’s Foreign Ministry, Esmail Baghaei, said discussions on the memorandum were progressing, but detailed talks on nuclear matters were not yet underway.
Despite the market relief triggered by the developments, concerns remain over how quickly oil production and shipping infrastructure damaged during the conflict can fully recover.
Analysts also warn that unless a long-term agreement guarantees uninterrupted movement through the Strait of Hormuz, the risk of future disruptions to global energy supplies could persist.