US-Iran Tensions Send Oil Prices Plummeting Amid Hopes for Diplomatic Breakthrough

Oil prices dropped by about 5% on Tuesday to their lowest level in two weeks, as hopes rose that the pause in fighting between the US and Iran might lead to talks to end the conflict.

The price of Brent crude futures fell $4.27, or 4.8%, to settle at $84.09 a barrel, while US West Texas Intermediate (WTI) crude fell $3.35, or 4.1%, to settle at $79.26.

Despite the decrease in tensions, the two sides are far from resolving their differences that led to the effective closure of the Strait of Hormuz, which was used to transit about a fifth of global oil supplies before the war.

Oman presented Iran with a plan backed by Gulf states to manage the strait, including collecting voluntary fees for using it. However, Iran rejected this proposal and offered its own temporary arrangement to reopen the strait, under which one direction of traffic would pass through Iranian waters.