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Update: WTI Oil Falls to a Two-Month Low on Reports a U.S. Peace Deal With Iran is Near

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West Texas Intermediate (WTI) crude oil fell for a second day on Friday, falling to the lowest in nearly two months on expectations the United States and Iran are near a deal to end their war and reopen the Strait of Hormuz.

WTI crude oil for July delivery closed down US$2.893 to settle at US$84.88 per barrel, the lowest since April 17, while August Brent oil was last seen down US$3.11 to US$87.27.

The drop comes as U.S. President Trump on Thursday said he canceled planned attacks on Iran and said a peace deal with the country is near. Reports said a deal could be signed this weekend, however the Wall Street Journal said Iran has not yet agreed to the peace proposal, though Qatar's leader, Sheikh Tamim bin Hamad al-Thani, which is mediating talks, confirmed progress is being made on a agreement.

A deal could see the Strait of Hormuz reopen freeing up trapped supplies from the Persian Gulf nations that supplied about 20% of daily oil demand before the Strait was closed to shipping at the Feb. 28 start of the war. Traders are expecting a peace deal to offer a quick boost to supply as tankers trapped within the Gulf since the Strait was closed move to market, easing worries over depleted inventories and ending the largest ever supply shock.

"Oil slumped after President Trump talked up another peace deal, with markets this time appearing increasingly willing to believe it may be for real, despite the lack of confirmation from Tehran. Brent crude fell to a two-month low amid expectations of a surge in supply from tankers currently stranded in the Gulf," Saxo Bank wrote.

Still, a recovery of normal supply from the Persian Gulf is expected to be slow, as damage to infrastructure from the war is repaired and countries in the region restart shut-in oil fields, continuing the draw down on global inventories that began with the start of the conflict.

"Once the traffic through the Strait of Hormuz gradually begins to resume and shut-in oil production increasingly restarts, we assume (Brent) oil prices will begin to fall, decreasing to an average of $89/b by 4Q26. We assess that most shut-in oil production will be fully restored in 1Q27 and that global oil inventories will again start building, gradually lowering oil prices to an average of $79/b in 2027," the U.S. Energy Information Administration said in its monthly Short-Term Oil Energy Outlook released this week.

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