Oil Prices Drop After Reports of U.S.-Iran Talks on Ending War and Reopening Strait of Hormuz

Oil prices fell sharply on Wednesday after reports emerged that the United States and Iran were nearing an agreement to end their ongoing war and establish a framework for nuclear negotiations. 21. 9% lower in the previous session.

U.S. would temporarily halt Project Freedom, a military effort launched one day earlier to escort commercial vessels through the Strait of Hormuz. Trump cited progress in negotiations with Iran toward a final agreement.

The Trump administration stated that roughly 23,000 seafarers across vessels from 87 countries have been stranded in the Persian Gulf following Iran's effective shutdown of the strait. S. officials and two other sources briefed on the issue via Axios.

Iran expects to respond on several key points over the next 48 hours. S. and Iran began in February. A spokesperson for Iran's foreign ministry said they were evaluating Washington's 14-point peace proposal, as told to CNBC.

Iran said earlier on Wednesday that it would only accept a peace deal that was fair. The White House was not immediately available to comment. Core terms of the memorandum include Iran pausing enrichment, no nukes, accepting UN inspections, and curbing underground sites.

U.S. would ease sanctions and release frozen assets. Both sides would loosen restrictions in the Strait of Hormuz. The plan would trigger a 30-day negotiation window likely in Geneva or Islamabad.

Trump has paused escalation, and officials caution that talks remain uncertain. No deal is final yet. Marco Rubio said, 'The operation is over: Epic Fury. We are done with that stage of it. We’re now on to this project of freedom,' via a statement.

Roughly 13 million barrels per day of disrupted supply is being largely offset by inventory, which is declining rapidly, according to Warren Patterson, head of commodities strategy at ING. Surging oil and energy costs were already creating demand destruction globally, Azimut Group's co-head of fixed income Nicolo Bocchin warned, adding that even if the waterway reopens, normalization in shipping and trade flows would still take weeks and weeks.

A deal that normalizes oil flows through the Strait of Hormuz is crucial, Patterson said in a research note.