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(Bloomberg) — Oil fell as a diplomatic push by the US to try to end the war with Iran gathered pace, eclipsing news of more troops being sent to the region and the Strait of Hormuz remaining largely shut.
Brent sank as much as 7% toward $97 a barrel before paring the drop, while West Texas Intermediate was near $89. The US drafted a 15-point plan to help bring the conflict to a close, according to people familiar with the matter. The proposal was delivered to Iran via Pakistan.
Earlier, President Donald Trump’s administration ordered the 82nd Airborne Division to deploy about 2,000 soldiers to the region, according to a person familiar with the matter, as the White House weighed options to ease Iran’s hold on the strait, the vital waterway that’s a focus of the conflict.
“We have clearly moved from what could have become the ‘obliteration’ stage in the US-Iran war toward a negotiated endgame, though given the lack of trust on both sides, that endgame is likely to be complex,” said Robert Rennie, head of commodity and carbon research at Westpac Banking Corp.
Futures pared losses as Tehran fired a new wave of missiles at Israel, and signaled little willingness to compromise. Iran’s armed forces added to a stream of messaging that ruled out ceasefire talks, according to state-run IRIB News. They added that they wouldn’t allow oil prices to return to their previous levels until all threats against the country were removed.
Oil remains on track for a substantial monthly surge after a volatile run of trading as investors tracked the fallout from the war, which is now in its fourth week. At the heart of the conflict, Tehran has moved to exert control over Hormuz, choking off supplies of crude and gas from Persian Gulf producers to global markets, triggering concerns of an energy crunch.
The US public position on the conflict has shifted rapidly in recent days. At the weekend, Trump raised the stakes with a threat to bomb Iran’s power plants if Hormuz were not fully reopened within 48 hours. The president then pivoted away from that deadline, saying he would allow five days for talks. The 15-point overture to Tehran — as well as the decision on the extra troops — followed, even as Iran tightened its grip over the key strait.
The details of the latest proposal remained unclear, though Trump has publicly mused that any agreement would have to include a prohibition on Iran ever obtaining a nuclear weapon or enriching radioactive material for civilian purposes. It was also not clear if Israel backed the approach.
The pullback in prices reflects the “war-risk premium being cut,” said Charu Chanana, chief investment strategist at Saxo Markets. “But this is unlikely to be seen as an all-clear yet because Iran has publicly denied direct talks, while military activity and troop deployments are still continuing.”
