The price of oil showed an encouraging drop for the markets on Wednesday morningafter news leaked of a possible satisfactory agreement between the United States government and Iran. High expectations that this would come to fruition, especially since it would mean the entire reopening of commercial transit in the Strait of Hormuz, caused both US crude oil and the international benchmark to fall below $90 in the early hours of the day.
According to Reuters, Iranian state television claimed to have access to a copy of the draft of a memorandum of agreement between Washington and Tehran. The news was enough to modify the behavior of the marketsespecially given the fear of a prolonged interruption of the world’s crude oil supply due to the conflict in the region.
During the day, West Texas Intermediate (WTI) oil futures recorded a drop of close to 5%. The contract fell 4.6% and stood at $89.55 dollars per barrel around 9:26 in the morning, Eastern Time in the United States. Meanwhile, Brent crude oil, an international reference, fell 3.73% to $95.87 dollars per barrel.
Within the document obtained by Iranian media and cited by Reuters, commitments related to maritime security and the restoration of trade flow in the Strait of Hormuzone of the most important oil routes in the world. According to the report, Iran would agree to restore commercial transit in the area to pre-conflict levels within a month after signing the agreement with the United States. Besides, the administration of maritime traffic would be carried out jointly with Oman.
Reports also indicate that US military forces would leave areas near Iran and that the naval blockade implemented during the crisis would be lifted. Until now, Neither the White House nor the United States Department of Defense have officially confirmed the content of the alleged draft..
Wall Street also reacts positively to the agreement
News about the possibility of a US-Iran deal also boosted Wall Street. The Dow Jones Industrial Average advanced nearly 300 points and reached new highs during the dayas investors reacted to the drop in oil prices and expectations of a reduction in tensions in the Middle East.
For its part, the Nasdaq Composite managed to rise supported by the technology sector and the rise of companies linked to artificial intelligence and semiconductors.
In contrast, The S&P 500 index registered a slight decrease of 0.07%mainly affected by losses in the cybersecurity sector.
The technology sector continued to be one of the main drivers of Wall Street. Micron posted a slight rise after soaring 19% in the previous session, movement that allowed the company to surpass $1 trillion in market value for the first time. The rally followed an upbeat report from UBS, which noted that long-term deals to supply memory for artificial intelligence projects could double the company’s value.
The South Korean SK Hynix, a direct competitor of Micron, also reached a capitalization of more than a trillion dollars.
Are tensions in the Middle East ending?
The relationship between both countries went through days of maximum tension this week. US forces carried out strikes in southern Iran, an action the Pentagon described as a defensive measure. The Iranian government subsequently warned that it would respond militarily to those operations.
Despite the markets’ initial optimism, energy sector specialists consider an immediate recovery in oil flow to be little doubtless. Logistical and security problems in the region could keep export capacity limited for several months.
“It will take at least four months for oil flows to reach 80% of normal levels“even if the conflict between the United States and Iran ends immediately,” said Sultan Ahmed al-Jaber, head of the Abu Dhabi National Oil Company. “Full normalization of flows will not occur until the first or second quarter of 2027.”
Although a possible agreement could reduce pressure on oil prices in the short term, the market remains attentive to any political or military movement in the Middle East, a key region for global energy supply.
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