(Investing) – Oil prices on Thursday sharply pared gains after a report that Washington and Tehran had reached a deal to extend an ongoing ceasefire and launch further negotiations over Iran’s nuclear program, pending President Donald Trump’s final approval.
Crude prices had earlier ticked higher after the U.S. and Iran traded fresh strikes, denting hopes for a peace deal that would unblock the Strait of Hormuz.
At 11:43 ET (15:43 GMT), Brent crude futures expiring in August, the global oil benchmark, were up 1% to $93.19 a barrel, pulling back from a climb of as much as 4% to $95.97 a barrel. U.S. West Texas Intermediate crude futures expiring in July added 0.2% to $88.86 a barrel, eating into an increase of as much as 4.3% to $92.51 a barrel.
U.S. and Iran deal awaits Trump approval
Axios reported that Washington and Tehran had reached an agreement over a 60-day memorandum of understanding (MoU), but it still needed Trump’s nod, citing two U.S. officials.
Trump had been briefed on the details of the final deal and the president had asked for a couple of days to think about it, one of the U.S. officials said, according to Axios. The MoU will include “unrestricted” shipping through the critical Strait of Hormuz and the lifting of an ongoing U.S. naval blockade of Iran’s ports and coastline. The MoU will also include a commitment by Iran to not pursue a nuclear weapon.
An agreement would represent the biggest breakthrough in a conflict that has dragged on since the end of February when the U.S. and Israel launched a joint assault on Iran. All sides have been locked in a protracted ceasefire since the beginning of April as negotiations have continued. The strait has remained effectively closed since the start of the war, leading to the biggest oil supply disruption in history.
“If an agreement is reached, it may be because the oil market is approaching a dangerous stage for both Iran and the global oil industry. Iran faces a lack of oil storage that could force it to shut down oil production, and the global oil industry is running on such slim supplies that it could start affecting pipelines and other oil infrastructure,” analysts at Yardeni Research said in a note to clients.
More fighting in the Gulf
Hopes for a peace deal had earlier taken a dent after a fresh exchange of fire in the Gulf. U.S. Central Command said Iran late on Wednesday launched a ballistic missile towards Kuwait that was successfully intercepted by Kuwaiti forces. CENTCOM said the “egregious ceasefire violation” occurred hours after Iranian forces launched five attack drones in and near the Strait of Hormuz.
“All drones were successfully intercepted by U.S. forces which also prevented a sixth drone launch from an Iranian ground control site in Bandar Abbas,” CENTCOM said.
Meanwhile, Iran’s state media said the country’s armed forces had fired warning shots at four ships that had attempted to cross the strait without navy supervision, forcing them to turn back. State media also showed footage from the Islamic Revolutionary Guard Corps retaliating against the Bandar Abbas attacks.
Thursday’s attacks came shortly after Trump dismissed a report that Iran and Oman will manage shipping through the strait under a deal to end the war, saying “Oman will behave just like everybody else or we’ll have to blow them up.” The president also indicated that Iran wanted to make a deal, but that he was not satisfied with the agreement yet.
Ambar Warrick and Scott Kanowsky contributed to this article
