Oil prices collapsed on Wednesday as markets continued to digest reports that the U.S. and Iran were discussing a one-page memorandum designed to pause the conflict and create a framework for broader negotiations.
Brent crude was down 8.58%, to trade at $100.4 per barrel on Wednesday at 6:40 a.m. ET, while WTI was down 9.82%, to trade at $92.23.
Markets are now effectively betting that Washington cannot sustain an open-ended confrontation with Iran if elevated oil prices continue spilling deeper into consumer prices, credit markets and transportation costs.
Earlier on Wednesday, Iran said it would only accept “a fair and comprehensive agreement” in talks with the United States over ending the conflict in the Middle East, Iranian Foreign Minister Abbas Araghchi said during a visit to China.
After one round of talks mediated by Pakistan early into the conflict, the U.S. and Iran have failed to set up further meetings as both sides have been digging in on their respective positions.
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Tensions re-escalated early this week after U.S. President Donald Trump announced ‘Project Freedom’, an effort to help guide vessels out of the Strait of Hormuz. Iran, for its part, announced an expanded area around the Strait of Hormuz it now claims it controls and attacked an oil port in the United Arab Emirates.
Only three days into the Project Freedom endeavor, President Trump late on Tuesday called off the effort, saying in a social media post that “Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran.”
“Based on the request of Pakistan and other Countries, the tremendous Military Success that we have had during the Campaign against the Country of Iran and, additionally, the fact that Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran, we have mutually agreed that, while the Blockade will remain in full force and effect, Project Freedom (The Movement of Ships through the Strait of Hormuz) will be paused for a short period of time to see whether or not the Agreement can be finalized and signed,” President Trump posted.
Iran’s Araghchi said on Wednesday, without directly referring to President Trump’s latest remarks, that “We will do our best to protect our legitimate rights and interests in the negotiations,” and “We only accept a fair and comprehensive agreement.”
On Tuesday, Araghchi posted on X that “Events in Hormuz make clear that there’s no military solution to a political crisis. As talks are making progress with Pakistan’s gracious effort, the U.S. should be wary of being dragged back into a quagmire by ill-wishers. So should the UAE.”
“Project Freedom is Project Deadlock,” Araghchi said on Tuesday.
By Charles Kennedy for Oilprice.com
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