U.S. crude oil prices experienced a sharp decline on Wednesday, falling more than 4% following reports that Iran may restore commercial traffic through the Strait of Hormuz as part of a draft framework agreement with the United States [1]. West Texas Intermediate (WTI) futures dropped 4.6% to $89.55 per barrel by 9:11 a.m. ET, while international benchmark Brent crude slid 3.75% to $95.85 [1].
According to Iranian state television, which cited Reuters, Tehran has committed to restoring Hormuz traffic to pre-war levels within one month of reaching an agreement with the U.S. [1]. The draft memorandum of understanding reportedly includes provisions for Iran to manage ship traffic through the strait in cooperation with Oman, the withdrawal of U.S. military forces from the vicinity of Iran, and the lifting of the naval blockade [1].
The negotiations come amid heightened tensions, as the U.S. and Iran have oscillated between the prospect of a deal and renewed military escalation. The Pentagon described recent U.S. strikes in southern Iran as defensive, while Tehran has vowed to retaliate [1].
Despite the positive market reaction to the potential deal, industry experts remain cautious about the speed of recovery in oil flows. Sultan Ahmed Al Jaber, head of Abu Dhabi National Oil Co., stated last week that it would take at least four months to ramp oil flows to 80% of normal levels even if the conflict ends immediately, and full normalization may not occur until the first or second quarter of 2027 [1].
CONCLUSION
The report of a potential U.S.-Iran agreement to restore Hormuz traffic triggered a significant drop in oil prices, reflecting market optimism about improved supply prospects. However, industry leaders caution that a full recovery in oil flows could take months or even years, tempering expectations for an immediate return to pre-war conditions.