Global energy markets saw Brent crude prices plunge 11% to below $100 a barrel on Wednesday morning. The decline was triggered by reports of diplomatic engagement between Washington and Tehran that was said to be close to fruition to end the three-month armed conflict in the Middle East.
The deal being negotiated reportedly includes a moratorium on Iran's nuclear program in exchange for the lifting of economic sanctions by the US and the release of Tehran's frozen assets. The most critical commitment is the reopening of the Strait of Hormuz, a strategic waterway previously closed by war.
While markets showed signs of optimism, Iranian authorities described the reported terms of the deal as biased and reeking of American propaganda. Tehran warned that it remained prepared for retaliation if its national demands were set aside in the negotiations.
Domestically, the Trump administration is facing intense pressure as the average price of gasoline in the US reached $4.53 a gallon, up $1.40 from a year ago. The estimated cost of the war, which is at least $25 billion, is also a major factor in the White House's push for a quick peace resolution.
Energy experts warn that even if a deal is signed, the process of normalizing the market could take months. The cost of repairing the destroyed energy infrastructure is estimated to exceed $50 billion, in addition to shipowners' concerns about the security risks that have not yet been fully stabilized in the conflict zone.
