On Wednesday, Iran's state broadcaster announced that Tehran had received an initial draft of a 14-point Memorandum of Understanding (MOU) framework with the United States, which purportedly included reopening the Strait of Hormuz, lifting the US naval blockade on Iranian ports, and withdrawing US forces from Iranian territory [1]. However, within hours, the White House publicly denied the existence of such an agreement, labeling the report as untrue and the MOU itself as a complete fabrication [1]. Despite the White House's denial, crude oil markets reacted sharply to the initial headline, with Brent crude falling roughly 3% to trade near $93.00 per barrel and West Texas Intermediate (WTI) dropping nearly 4% to around $90.00 per barrel [1]. The market's reaction suggested a belief that peace was imminent, even though the existence of the MOU was disputed by both parties [1].
The reported MOU, according to Tehran's media, is being portrayed as an American concession, while Washington maintains that no binding document exists and that the two sides are still debating whether a draft was even created [1]. The leaked terms reportedly defer critical issues, such as Iranian nuclear enrichment, to a 60-day negotiation window [1]. Analysts note that even if a deal were to materialize, reopening the Strait of Hormuz would not be immediate due to the need for de-mining and coordinated lifting of the US blockade, processes that could take weeks [1].
The International Energy Agency's latest data indicates that global oil stocks drew down by approximately 250 million barrels across March and April, with OECD on-land inventories alone dropping by 146 million barrels in April [1]. This highlights the current tightness in supply, which cannot be quickly resolved even if the geopolitical situation improves [1].
From a technical perspective, Brent crude has retraced nearly all of its May rally, trading near $93.00, with key support at the rising 200-day EMA around $82.00 and resistance at $96.50 and $100.00 [1]. The Stoch RSI suggests a potential near-term technical bounce, but overall daily momentum remains bearish [1]. Analysts suggest that while the directional bias is lower as long as the peace narrative persists, there is an asymmetry favoring fading the selloff into structural support rather than chasing further declines [1].
CONCLUSION
Crude oil prices experienced a sharp selloff driven by unverified reports of a US-Iran peace framework, despite official denials from the White House. The market's reaction appears to be based more on optimism than on confirmed facts, and analysts caution that supply constraints and logistical challenges remain significant. Technical indicators point to bearish momentum, but key support levels may limit further downside.