Oil plunges nearly 10% as US-Iran deal hopes deepen, markets rally

Oil prices extended sharp decline on Wednesday as markets reacted to growing signs of de-escalation between the United States and Iran, with both sides reportedly discussing a preliminary framework to pause the conflict.

Brent crude fell 8.58 percent to $100.4 per barrel as of 11:40 am West Africa Time (WAT), while US West Texas Intermediate (WTI) dropped 9.82 percent to $92.23, marking one of the steepest single-day declines in recent months.

The sell-off follows reports that Washington and Tehran are considering a one-page memorandum aimed at halting hostilities and creating a pathway for broader negotiations.

Investor sentiment has shifted rapidly, with markets increasingly betting that the US cannot sustain a prolonged confrontation if elevated oil prices continue feeding into inflation, credit conditions and transportation costs.

Earlier, US President Donald Trump announced a pause in “Project Freedom,” an initiative to reopen the Strait of Hormuz, citing “great progress” toward a potential agreement with Iran.

“Based on the request of Pakistan and other countries… we have mutually agreed that… Project Freedom will be paused for a short period of time to see whether the agreement can be finalised,” Trump said in a social media post.

The Strait of Hormuz remains a critical artery for global oil flows, and any easing of tensions in the region typically leads to a rapid unwinding of geopolitical risk premiums in crude markets.

Iran, however, signalled caution in the ongoing talks. Foreign Minister Abbas Araghchi, speaking during a visit to China, said Tehran would only accept “a fair and comprehensive agreement.”

“We will do our best to protect our legitimate rights and interests in the negotiations,” he said, highlighting that key differences remain despite progress.

Diplomatic efforts have so far struggled to gain sustained traction. After an initial round of talks mediated by Pakistan, both sides have yet to agree on subsequent meetings, with entrenched positions complicating negotiations.

Tensions had escalated earlier in the week after Trump unveiled Project Freedom and Iran responded by expanding its claimed control around the Strait of Hormuz and launching an attack on an oil port in the United Arab Emirates.

Despite the fragile backdrop, financial markets have reacted positively to the latest developments. Equity markets in the US, Asia and Europe are rallying on optimism that a negotiated resolution could avert prolonged supply disruptions and stabilise global energy markets.