Trump Hints at Peace Deal with Iran, Oil Prices Fall

New York. Following US President Donald Trump's indication of a potential peace deal to end the war with Iran, crude oil prices in the global market have fallen for the second consecutive day.

Oil prices declined on Wednesday amid expectations that oil supply from the Middle East will resume. On Wednesday, the price of Brent crude for July fell by $1.52, or 1.38 percent, to $108.35 per barrel.

Its price had fallen by 4 percent in the previous trading session. Similarly, the price of US benchmark West Texas Intermediate (WTI) for June also fell by $1.50, or 1.47 percent, to $100.77 per barrel, after closing down 3.9 percent the previous day.

President Trump unexpectedly announced on Tuesday evening that he would temporarily halt 'Project Freedom', a military operation to safely extract ships trapped in the Strait of Hormuz. He took this step, claiming concrete progress had been made towards a comprehensive agreement with Iran, although the details of the agreement have not been made public.

There has been no immediate reaction from Tehran to Trump's announcement. However, despite this flexibility, Trump has made it clear that the US Navy's blockade on Iranian ports will continue.

The Strait of Hormuz waterway, which accounts for about one-fifth of the world's total oil and natural gas supply, has been virtually shut down since the US and Israel launched military action against Iran on February 28. The closure of supply in the global market led to a sharp rise in oil prices, causing Brent crude to reach its highest point since March 2022 last week.

Announcing the decision on social media, Trump wrote, 'We have decided to temporarily halt Project Freedom to see if a deal can be finalized and signed, with the blockade remaining in full effect by mutual agreement.'

Trump's announcement came just hours after US Secretary of State Marco Rubio briefed reporters about the operation to extract trapped tankers from the waterway. Earlier on Monday, the US military claimed to have destroyed some small Iranian boats, cruise missiles, and drones while safely escorting two commercial ships out of the Gulf region.

With the Strait of Hormuz closed, oil refineries worldwide have had to use their inventories to meet demand, leading to a significant depletion of global inventories. According to data from the American Petroleum Institute, US crude oil inventories fell by 8.1 million barrels in the week ending May 1.

Similarly, gasoline inventories fell by 6.1 million barrels and other fuel inventories by 4.6 million barrels. Amidst this pressure on oil supply, Trump's latest diplomatic move has provided some relief to the market, but it is analyzed that market volatility will persist until a permanent peace agreement is reached.