Oil prices briefly plunged on Wednesday morning on news that the US and Iran may be within striking distance of a deal to end the war in Iran that has wracked the global energy market.
Futures on Brent crude (BZ=F), the international benchmark, fell by as much as 11% to briefly dip below $100 per barrel before regaining the level to trade back above $103, after only a week ago crossing $126. Contracts on US benchmark WTI crude (CL=F) lost as much as 11.3% to trade below $91 before paring losses to trade above $96.
The initially precipitous drop in oil prices comes after Axios reported that Washington and Tehran may be close to reaching an agreement to end the war — now in its third month — and reopen the Strait of Hormuz, while establishing a framework for negotiations over Tehran’s nuclear program. Bloomberg and Reuters reported similar information.
Read more: How oil price shocks ripple through your wallet, from gas to groceries
Key provisions of the deal in progress include a moratorium on Tehran’s nuclear enrichment program, US agreements to lift sanctions on Iran and release billions of dollars in frozen funds, and commitments from both sides to reopen the Strait of Hormuz and allow commercial traffic to restart, Axios reported.
Iran is expected to respond to the US proposal through mediator nation Pakistan within the next two days, Bloomberg reported. The Iranian semi-official news agency ISNA reported while Iran is discussing an end to the war, Tehran has not yet reopened discussions of the country’s nuclear program, a consistent red line for the Trump administration.
Ebrahim Rezaei, the spokesperson for Iran’s National Security and Foreign Policy Commission, said Wednesday that the terms reported by Axios represent an American “wish list,” and that Tehran is prepared to respond militarily if its own demands aren’t met.
“Iran has its finger on the trigger and is ready; if they do not surrender and grant the necessary concessions, or if they or their devilish henchdog allies try to act mischievously, we will deliver a harsh and regret-inducing response,” Rezaei wrote on X.
The news of potential diplomatic progress comes after President Trump said Tuesday night that he was ending “Project Freedom,” the White House’s public operation to guide vessels out of the Persian Gulf through Omani waters, after announcing the plan only two days prior on Sunday.
The plan kicked off a renewed wave of violence in the Middle East on Monday, as Iran struck key energy infrastructure inside the United Arab Emirates for the first time since April and targeted several vessels in and around the Strait of Hormuz. Maritime risk and insurance experts told Yahoo Finance that the plan was unlikely to be effective without firm security guarantees and clear frameworks from the US.
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In comments at the White House on Tuesday, Secretary of State Marco Rubio said the US had ended Operation Epic Fury, the name for the initial air strikes and other military action against Iran.
“We achieved the objectives of that operation, we’re not cheering for an additional situation to occur — we would prefer the path of peace,” Rubio said. “What the president would prefer is a deal … that is, so far, not the route that Iran has chosen.”
The US is working on an initial framework for potential nuclear program discussions, Rubio said Tuesday, though firm negotiations haven’t begun. He added that Iran could maintain a civilian nuclear program with no enrichment capacity if Tehran wanted to do so, though the White House believes the regime is seeking a military program.
Trump told the New York Post on Wednesday that it’s too early to begin preparing for face-to-face peace talks between American and Iranian negotiators. The president wrote on Truth Social that if Iran does not agree “to give what they have already agreed to,” the US military will resume air strikes at a “much higher level and intensity than it was before.”
The potential dealmaking comes as the White House faces increased domestic pressure to wind down a war that has proven deeply unpopular and so far cost the US at least $25 billion, according to congressional testimony from senior Pentagon leaders.
US gas prices at the pump reached a national average of $4.53 per gallon on Wednesday, according to AAA, roughly $1.40 per gallon higher than a year ago. Rising energy costs have pushed up costs on a range of goods over the past two months, with wider implications for metals and key food fertilizers that also flow out of the Persian Gulf.
The key for the White House will be how any signed deal compares to the Joint Comprehensive Plan of Action (JCPOA), the deal Washington signed with Tehran under the Obama administration.
While the JCPOA allowed Iran to immediately enrich uranium up to a limit of 3.67%, the deal being worked on by the Trump administration would reportedly seek a years-long moratorium on any nuclear activity inside Iran, per Axios. The JCPOA also allowed Iran to keep a small stockpile of nuclear material inside the country, with much of the rest sent to Russia. The White House is now reportedly seeking the removal of all nuclear stockpiles.
Rubio said Tuesday that the US must break Iran’s control of the Strait of Hormuz, citing risk to other major trade routes if Tehran is allowed to dominate the key waterway.
“If we live in a world where a rogue state like this Iranian regime is allowed to claim, as a new normal, control over an international shipping lane, it will not be long before you see that happen in multiple shipping lanes around the world,” the secretary said.
That said, even if the US were to reach a deal with Iran and both sides were to agree to a reopening of the Strait of Hormuz, it is likely to still take months for the global energy system to normalize, experts told Yahoo Finance.
The bill for repairs to critical energy infrastructure has surpassed $50 billion, according to Rystad Energy, and shipowners will be loath to face the risk of reescalating military action by Iran.
People ride motorcycles near a billboard featuring an image of the late Supreme Leader of Iran, Ayatollah Ali Khamenei, in Tehran, Iran, May 6, 2026. Majid Asgaripour/WANA (West Asia News Agency) via REUTERS · Reuters / REUTERS
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.
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