Crude oil prices fell nearly 4 percent on Monday as renewed diplomatic efforts to end the U.S.-Iran conflict and reopen the Strait of Hormuz strengthened expectations of a possible agreement, extending the sharp losses recorded last week.
Brent crude futures declined by 3.80 percent to $94.58 per barrel as of 2:40 p.m. WAT, shedding $3.74 from the previous settlement. U.S. West Texas Intermediate (WTI) futures also dropped 3.48 percent to $87.67 per barrel, representing a decline of $3.16.
The latest losses follow a 16 percent weekly plunge in Brent crude, its steepest weekly decline since the beginning of the COVID-19 pandemic, as market participants increasingly anticipate a diplomatic breakthrough between Washington and Tehran.
The renewed optimism followed reports that Qatar's Prime Minister was heading to the White House with an Iranian proposal for an interim agreement aimed at restoring commercial shipping through the Strait of Hormuz.
Under the reported terms, Iran would reopen the strategic waterway and halt attacks on tankers in the Gulf, while the United States would lift its naval and economic blockade and release $8 billion in Iranian funds frozen in Qatar.
The proposed arrangement would also see Tehran abandon its demand to control the strait and impose transit charges on vessels passing through it. However, Iran would not agree to include its nuclear programme in the negotiations.
Two diplomatic sources told Israeli media that Iran had approved the proposed terms. Neither Washington nor Tehran has officially confirmed the reported agreement, while several senior U.S. officials are said to oppose the arrangement.
U.S. President Donald Trump said on Sunday that further American strikes against Iran were highly unlikely if negotiations produced a strong agreement.
However, U.S. Secretary of State Marco Rubio described Iran's demands as unacceptable and said the two sides remained far from reaching a breakthrough. Iranian Foreign Minister Abbas Araghchi maintained that Tehran's offer to reopen the Strait of Hormuz within two days remained available, provided the conflict ended across all fronts.
The diplomatic developments have not eliminated security concerns around the waterway. The United States and Iran reported fresh attacks on vessels in or near the Strait of Hormuz over the weekend, while Yemen's Iran-aligned Houthis claimed responsibility for an attack on Saudi Aramco's offices in Riyadh on Sunday.
The renewed incidents have kept concerns over shipping security alive despite the decline in international benchmark prices.
Murban crude, a physical benchmark for Gulf oil, moved in the opposite direction, rising 3.4 percent to $99.17 per barrel in Asian trading, highlighting the continued strength of some physical crude markets amid uncertainty over regional supply.
The latest diplomatic effort also faces the risk of another breakdown. A previous memorandum of understanding between Washington and Tehran, negotiated in Switzerland in May, collapsed following an Iranian attack on oil tankers in the Strait of Hormuz.
For the global oil market, the proposed agreement could ease supply concerns if it leads to a sustained reopening of the waterway and the restoration of normal tanker movements. However, the reported terms remain unconfirmed, leaving prices exposed to further volatility as negotiations and security developments unfold.
