LONDON — Oil prices plunged on Thursday as optimism grew over new proposals exchanged between the United States and Iran that could lead to an end to their conflict, traders and analysts said.
Brent crude futures fell sharply in early trading, while U.S. West Texas Intermediate crude also declined amid reports of progress toward a possible one-page memorandum of understanding to halt hostilities. Prices had been elevated for weeks due to disruptions in the Strait of Hormuz.
Details of the latest proposals remained unclear. Iranian officials said they were reviewing a fresh U.S. offer delivered through Pakistani mediators, according to Iranian state-linked media. The exchanges follow earlier Iranian counterproposals, sources familiar with the indirect talks reported.
President Donald Trump said on Wednesday there was “a very good chance” of reaching a deal, according to PBS NewsHour. He has indicated that a successful agreement would reopen the Strait of Hormuz to all shipping.
A source from the Pakistani mediators told Reuters that the two sides were closing in on an initial agreement. Oil traders responded by pricing in the possibility of restored crude flows through the critical waterway, which carries about one-fifth of global oil supplies.
“Oil prices have dropped and global stock markets have risen following reports that the US and Iran are close to a deal to end the war,” the BBC reported, with Brent briefly falling toward $97 per barrel before some recovery.
The conflict had severely disrupted shipping through the Strait of Hormuz earlier in 2026, prompting sharp increases in oil prices as tanker traffic was curtailed and insurance costs rose. A fragile ceasefire has been in place for several weeks, though sporadic incidents have occurred.
Analysts noted that any lasting deal would likely include steps toward sanctions relief and limits on Iran’s nuclear program, but significant gaps remain between the two sides. U.S. officials have stressed the need for verifiable constraints on enrichment activities, while Iranian statements have called for guarantees against future military action.
Energy markets remained volatile. Earlier in the week, prices had fluctuated on news of the diplomatic exchanges and partial resumption of some vessel movements through the strait.
As of Thursday, no final agreement had been announced. Negotiations continue indirectly, with both sides indicating that further responses were expected in the coming days. Market participants will monitor developments closely for any confirmation of a breakthrough that could ease supply concerns.
