SINGAPORE — Oil prices declined this week after the United States and Iran announced a draft memorandum of understanding aimed at ending months of conflict and reopening the Strait of Hormuz, a key route for global energy shipments, according to market data and statements from both governments. The announcement reduced concerns about potential supply disruptions and prompted a broad selloff in crude futures.
Brent crude and U.S. West Texas Intermediate futures fell by more than 4% following the announcement, with benchmark prices dropping to their lowest levels in several months, according to Reuters and market reports. Traders cited expectations that Iranian oil exports could gradually return to global markets and that shipping through the Strait of Hormuz could resume under the proposed agreement.
U.S. President Donald Trump said the two sides had reached an agreement to halt hostilities, while Iranian officials confirmed that a draft memorandum had been prepared and would be followed by negotiations on a final settlement. “The Deal with the Islamic Republic of Iran is now complete,” Trump wrote on social media after the announcement, according to Reuters.
According to a senior Iranian official cited by Reuters, the draft memorandum includes provisions related to the reopening of the Strait of Hormuz, temporary waivers on U.S. oil sanctions, discussions on Iran’s nuclear program, and a framework for broader negotiations over the next 60 days. Details of the final agreement remain unclear, and officials from both sides have said further talks are required before a comprehensive accord can be completed.
Market participants said the prospect of additional Iranian crude reaching international markets weighed on prices. A senior U.S. official told Reuters that Iran would be permitted to begin selling oil once the memorandum is formally signed, provided Tehran complies with the agreement’s conditions. The official described the arrangement as “a performance-based agreement.”
Despite the initial decline, oil prices later recovered part of their losses as investors assessed uncertainties surrounding implementation of the proposed accord. Analysts and traders noted that shipping activity through the Strait of Hormuz has not yet fully normalized and that some provisions of the memorandum remain subject to negotiation.
As of Wednesday, officials from both countries were preparing for a formal signing ceremony expected in Switzerland later this week, while negotiations on a broader settlement were scheduled to continue. Details of the final agreement and the timeline for restoring energy flows remained under discussion, officials said.
