WASHINGTON (dpa-AFX) - Extending the losses from yesterday's session, crude oil prices have went into freefall today after U.S. President Donald Trump indicated the U.S. and Iran may reach a deal soon. In addition, media reports hinted that the U.S. and Iran are readying a one-page Memorandum of Understanding to end the war.
WTI Crude Oil for June month delivery was last seen trading down by $7.83 (or 7.66%) at $94.44 per barrel.
The Strait of Hormuz has been closed for most vessel traffic since the military conflict between the U.S. and Iran started on February 28.
A few days into the operation, U.S. President Donald Trump announced a ceasefire on all attacks on Iran that he later extended for an indefinite period of time.
Trump also enforced a naval blockade on any ship travelling to and from Iranian ports across the Strait of Hormuz.
Due to the combined effect of the dual blockade, completely disabled from moving out of the strait, hundreds of ships loaded with cargo and thousands of seafarers remain stranded at sea.
With crude oil unable to be exported from Arab countries to the rest of the world, oil prices skyrocketed, and across the world, inflationary effects hit the national economies
Requested by several countries and as a humanitarian gesture, Trump announced an initiative, 'Project Freedom,' on Monday through which U.S. naval forces would escort the stranded vessels safely out of the region.
Since the operation commenced, three carriers were brought out of the conflict area under U.S. navigational guidance protected by the U.S. Navy.
In a reversal of events, Trump stated that he is pausing 'Project Freedom' as there was good progress in the ongoing negotiations with Iran though he stressed that the naval blockade on Iran will remain in full force and effect. Trump also warned that the U.S. would recommence bombing Iran if no deal is reached in the coming days.
Earlier, U.S. Secretary of State Marco Rubio stated that the objectives of the U.S. in the Middle East have been met and added that the military offensive on Iran (Operation Epic Fury) has concluded.
Both the ceasefire and the naval blockade on Iran remain with the strait still largely inaccessible.
On the diplomatic front, first Axios and later Reuters reported that the U.S. and Iran are closing in on a one-page 14-point Memorandum of Understanding which would end the war and set a framework for negotiations over a 30-day period to discuss contentious issues like Iran's nuclear program, U.S. sanctions on Iran, reopening the Strait of Hormuz, etc.
Reportedly, the U.S. side of the mediations are led by Trump's Envoy Steve Witkoff and Trump's son-in-law Jared Kushner.
CNBC quoted a spokesperson for Iran's Foreign Ministry as stating that Iran is evaluating the proposal.
On the inventory front, data from the American Petroleum Institute revealed that the crude oil inventories fell by 8,100,000 barrels for the week ending May 1, the third consecutive weekly decline.
According to the U.S. Energy Information Administration, for the week ending May 1, crude oil inventories in the U.S. fell by 2,314,000 barrels to 457,200 thousand barrels. At the Cushing, Oklahoma delivery hub, inventories decreased by 648,000 barrels.
For the same period, gasoline inventories dropped by 2,504,000 barrels, distillate inventories decreased by 1,294,000 barrels, and heating oil inventories fell by 38,000 barrels.
In its first meeting after the exit of the United Arab Emirates from the OPEC+ group on Sunday, the cartel agreed to an increase in oil output of 188,000 barrels per day. The group also announced it would increase June production by less than May's output hike of 206,000 bpd.
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