International Oil Prices Plunge Over 7% on Hopes for US-Iran Deal...Largest Drop Since Mid-April

Largest Drop Since April 17
Brent Down 7.83%, WTI Down 7.03%
"Even if Hormuz Reopens, Normalization Could Take Months"

On May 6 (local time), international oil prices plunged by more than 7% on expectations that the United States and Iran are close to reaching a peace agreement. This is the largest drop since mid-April.

U.S. President Donald Trump is speaking at the White House on the 6th (local time). Photo by AP News

On this day, July Brent crude oil futures, the global benchmark traded on the ICE Futures Exchange, closed at $101.27 per barrel, down 7.83% from the previous session. The June West Texas Intermediate (WTI) contract settled at $95.08 per barrel, down 7.03%. This is the first time since mid-April that such a steep decline has occurred. Brent and WTI both hit their lowest levels since April 21 and April 24, respectively. In terms of decline, both saw their largest single-day drops since April 17.

This was interpreted as being due to optimism over the possible end of the war between the United States and Iran. The Guardian noted that expectations for a peace deal between the two countries have raised the possibility of reopening the Strait of Hormuz, and this has been reflected in the market.

Political media outlet Axios reported that the two countries are discussing a memorandum of understanding (MOU) to end the war. Reportedly, the MOU includes a temporary moratorium on Iran's nuclear enrichment, partial lifting of U.S. sanctions and release of frozen Iranian funds, gradual easing of Iran's restrictions on transit through the Strait of Hormuz, and a phased removal of the U.S. maritime blockade of Iran. The Islamic Revolutionary Guard Corps (IRGC) Navy of Iran also stated that "the threat from invading forces has been eliminated" and said safe and stable passage through the Strait of Hormuz would be ensured, which provided reassurance to the market.

However, it remains uncertain whether the expectations for a peace agreement will materialize immediately. The spokesperson for Iran's National Security and Foreign Policy Committee of parliament dismissed reports that the U.S. and Iran are close to an MOU to end the war, saying it is "nothing more than a wish for the United States, not a reality." Iran's foreign ministry also said it is reviewing the U.S. proposal. Iran is expected to convey its position to Pakistan, which is acting as a mediator, in the future.

U.S. President Donald Trump said in an interview with PBS on the same day that an agreement could be reached before his visit to China on May 14-15. The war with Iran has been a major variable in bilateral relations. However, President Trump also made a pressure-filled remark, warning that if no agreement is reached, he would resume attacks on Iran.

David Morrison, senior market analyst at Trade Nation, said, "Investors are pricing in a 'peace premium,' sparking a preference for risk assets," adding, "However, even if the strait reopens, it could take months for shipping and trade flows to normalize." He continued, "While crude inventories themselves are not dangerously low, the regional imbalances in distribution and a decrease in buffer stockpiles are fueling concerns about supply shortages in certain regions."

This content was produced with the assistance of AI translation services.