Oil prices plummeted to two-week lows on Wednesday, with both major benchmarks seeing their sharpest daily declines in a month following reports of a potential diplomatic breakthrough between the United States and Iran. Brent crude dropped over 9% to fall below the $100 mark for the first time since late April, while U.S. West Texas Intermediate saw a double-digit percentage loss to settle near $91.
The market sell-off was triggered by information from Pakistani mediators suggesting that the two nations are close to signing a preliminary memorandum of understanding. Reports indicate that the U.S. expects a formal response from Tehran within the next 48 hours, marking the most significant progress toward a ceasefire since hostilities broke out in February.
This potential de-escalation comes at a critical time for global energy supplies. The month-long closure of the Strait of Hormuz has severely depleted global oil and fuel inventories, forcing refineries to scramble for alternatives. Recent data from the American Petroleum Institute highlighted the strain, showing an 8.1 million barrel drop in U.S. crude stocks for the week ending May 1, alongside significant declines in gasoline and distillate inventories. While military efforts to escort stranded vessels through the waterway continue, traders are now pivotally focused on whether this peace deal can permanently restore maritime traffic and stabilize global markets.
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