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(Bloomberg) — Oil slid to a two-month low after President Donald Trump said a peace deal with Iran could be signed as soon as the weekend following US military strikes that cast doubt over progress to end the war.
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West Texas Intermediate tumbled almost 3% at the open to $85.13 a barrel, the lowest level since April 17, before paring some losses. Trump vowed to hit Iran again and threatened to seize its oil infrastructure, before announcing attacks were off and a deal was close, without confirmation from Tehran.
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The US president has previously insisted an agreement with Iran was within reach dozens of times, but none has yet materialized. The war has led to the near-total closure of the Strait of Hormuz, choking off crucial supplies of crude, fuels and natural gas to global customers, while stoking inflation.
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Iran has not yet approved any text for an agreement with the US, the semi-official Fars news agency reported. The American military launched a second day of strikes against the Islamic Republic early Thursday after Trump accused the country of dragging out talks on an interim peace deal.
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“It feels like the market is increasingly betting that both sides ultimately have more to lose from failure than compromise,” said Haris Khurshid, the chief investment officer at Chicago-based Karobaar Capital LP. “That doesn’t mean a deal is close. It just means the market no longer sees breakdown as the most likely outcome.”
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Trump told reporters in the Oval Office that a signing could take place as soon as this weekend in Europe and that Vice President JD Vance would attend if it materializes. He also said Iran’s supreme leader had agreed to a deal, though he cautioned the pact was not finalized.
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The deal would restart shipping in Hormuz, and include commitments from Tehran to not pursue a nuclear weapon, Trump said. Iran’s nuclear program and its frozen assets have long been sticking points that have prevented the parties from reaching an accord since agreeing to a ceasefire in April.
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Even if the two sides eventually reach a deal, multiple hurdles will impede the full resumption of normal oil flows. Among them, mines in Hormuz must be removed, shut-in fields may take months to restart, and damage to energy infrastructure from drone and missile strikes needs to be repaired.
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Some tankers are exiting the Persian Gulf through the strait, but there are signs in parts of the world that oil inventories are drawing dramatically. Fuel stockpiles in Singapore are at the lowest level since 2013, while US crude supplies have tumbled at a rapid rate over the past five weeks.
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—With assistance from Gabriel Levin.
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English (US)