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US Oil Update: Futures Drop on US-Iran Peace Deal Optimism

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Crude oil futures tumbled in midday trading on Friday, extending losses for a second consecutive session, as markets weighed the potential US-Iran deal that could ease geopolitical tensions in the Middle East.

Front-month West Texas Intermediate crude futures dropped by 3.2% to $84.78 per barrel, while Brent futures retreated by 3.4% to $87.23/bbl.

Soojin Kim, research analyst at MUFG, said the prospect of reopening the Strait of Hormuz and restoring oil exports has weighed on prices, but significant risks remain, including damage to energy infrastructure and the time required to restart shut-in production.

The US and Iran are edging closer to an agreement to reopen the Hormuz that could be signed as soon as Sunday. Pakistan's Prime Minister Shehbaz Sharif said on Friday that a final, agreed text of a peace deal between the US and Iran had been reached.

Prime Minister Sharif, in a social media post on X, confirmed that a "final, agreed upon" text of the agreement is in place, with Pakistan working with both the US and Iran to finalize the next steps.

However, Trump denied on Friday that the Iranian text reported by the media reflected what the US and Iran had agreed in writing.

The US President also alleged that Iran had launched a drone at an Indian vessel overnight, denouncing the attack as unacceptable.

"The terms that Iran leaked out to the fake news have nothing to do with the terms that were agreed to, in writing," Trump said in a Truth Social post.

Iranian media published a document in which the US would agree to withdraw its forces from around Iran, lift its naval blockade within 30 days, and provide the country with $300 billion in reconstruction funds. Tehran would reportedly reopen the Strait in 30 days, but under arrangements set by Iranian authorities.

Shortly after Trump's post, Iranian Foreign Minister Seyed Abbas Araghchi said in a social post that a memorandum of understanding between the US and Iran "has never been closer." Trump reposted Araghchi's comments on Truth Social.

"Pending its finalization, the media should refrain from entering speculation about its content," Araghchi posted on X, adding, "In line with our responsible and transparent approach, all details will be shared with the public in due course."

Meanwhile, Energy Secretary Chris Wright reportedly said that about 7 million barrels of oil per day are being released from the Persian Gulf with the help of the US military. Secretary Wright said that figure represents about half of the flow of crude oil that has been stuck in the Strait of Hormuz since the outbreak of the Middle East conflict.

OPEC lowered its forecast for global crude demand growth in 2026 to 970,000 b/d, according to the producer group's monthly report published on Thursday.

The current forecast reduced the expected oil demand growth in 2026 from 1.17 million b/d previously forecasted. For 2027, OPEC projected that demand would rise by 1.73 million b/d, up 190,000 b/d from the previous forecast.

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