Oil Prices Plunge on Signs of Negotiated Iran Off-Ramp

Oil prices dropped on Tuesday after Pakistan's army chief visited Tehran and reportedly carried a proposal for sanctions relief under an existing memorandum of understanding (MoU) between Washington and Tehran.

The MoU is seen as a sign of a negotiated off-ramp in the conflict, with traders believing it could convince the market that supply will return to normal levels. The document helped convince the market that supply would ultimately return to normal levels and contributed to Brent's collapse from above $120 to $72 in June.

The two-day decline in oil prices has been orderly rather than a rout because investors remain uncertain whether the strategy accelerates a resolution or delays one, and whether it affects Hormuz flows at all or simply escalates tension with Beijing.