U.S. oil falls below $90 on report Iran would restore Hormuz traffic

U.S. crude oil prices experienced a decline of approximately 5% on Wednesday following reports that Iran intends to restore commercial traffic through the Strait of Hormuz within the context of a framework agreement with the U.S.

As of 9:26 a.m. ET, West Texas Intermediate futures had fallen by 4.6%, reaching $89.55 per barrel. Meanwhile, the international benchmark, Brent oil, decreased by 3.73%, settling at $95.87 per barrel.

According to Iranian state television, which cited Reuters, the country has secured a draft framework for a memorandum of understanding with the U.S. Tehran is reportedly committed to reinstating commercial traffic through the Strait of Hormuz to prewar levels within one month of an agreement with the U.S. Notably, the management of ship traffic through the Strait will be executed in collaboration with Oman. Reports suggest that U.S. military forces would also withdraw from the area surrounding Iran and lift the naval blockade.

This week, tensions between Iran and the U.S. have reached a precarious point, oscillating between the prospect of a diplomatic deal and the potential for renewed military escalation. The U.S. military recently conducted strikes in southern Iran, which the Pentagon characterized as defensive in nature. In response, Tehran has promised to retaliate against these actions.

Industry experts express skepticism regarding the swift return of oil flows to prewar levels. Sultan Ahmed al-Jaber, the head of Abu Dhabi National Oil Co., indicated last week that it would take at least four months to elevate oil flows to 80% of normal levels, even if the U.S.-Iran conflict were to conclude immediately. He projected that it would not be until the first or second quarter of 2027 before flows fully normalize.