Crude oil futures plunged in after-hours trading on Thursday, erasing recent gains, after President Trump said that a peace deal with Iran could be signed as soon as the weekend, easing fears of an immediate disruption to global energy supplies.
Front-month West Texas Intermediate crude futures tumbled 4.01% to $86.42 per barrel, while Brent futures retreated by 4.22% to $89.18/bbl.
On Thursday, Trump said that the Strait of Hormuz would be opened as soon as a "great settlement" of the war in Iran was signed, a development that the US President expects to take place within days.
"We just made a great settlement of the war with Iran", Trump told reporters in the Oval Office, adding that the Hormuz will open as soon as the deal is signed, "which could be soon, very soon, maybe over the weekend in Europe."
Earlier, Trump declared on Truth Social that he had canceled strikes against Iran planned for Thursday night, just hours after he had vowed to hit Tehran "very hard" and threatened to seize the country's oil infrastructure.
Trump said there had been "discussions" that "have been brought to the highest level of Iranian leadership" surrounding peace negotiations to end the Middle East conflict.
Bjarne Schieldrop, chief commodities analyst at SEB Research, said that Trump has been posting for two months that a deal is imminent, but there has been no significant progress in the peace talks since the ceasefire started in early April.
Trump said on Thursday that the US would hit Iran very hard tonight, while threatening to seize Iran's Kharg Island, the country's crude export terminal, "at some point in the not-too-distant future."
On Wednesday, US forces hit targets in Iran and Tehran retaliated by launching missiles at several Middle East countries, including Jordan and Kuwait.
Iran struck several US military facilities in Kuwait and Bahrain, including Ali Salem and Ahmad al-Jaber air bases in Kuwait and Sheikh Issa air base in Bahrain, on Thursday. Tehran also carried out missile and drone attacks against US vessels operating in the Hormuz.
The Persian Gulf Strait Authority, set up by Iran, said the Strait would be closed, including for oil tankers and commercial ships, and that vessels attempting to pass would come under fire. The strategic waterway handles about 20% of global oil and gas shipments.
Separately, OPEC lowered its forecast for global crude demand growth in 2026 to 970,000 barrels per day, 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 to 800,000 b/d. For 2027, OPEC projected that demand would rise by 1.73 million b/d, up 190,000 b/d from the previous forecast.