Oil prices fell sharply on Wednesday morning as traders looked for momentum in US-Iran negotiations, with hopes spurred by reports from Iranian state media that such a deal would reopen the Strait of Hormuz.

Futures on Brent crude (BZ=F), the international benchmark, fell as much as 4.2% to briefly trade below $93 per barrel, while those on US benchmark WTI crude (CL=F) stumbled by as much as 5.7% to trade below $89.

Oil prices dropped precipitously at around 9 a.m. ET after Iranian state media, which is understood to be tightly controlled by the regime, reported that a draft memorandum between the United States and Iran said Iran would restore shipping through the Strait ⁠of Hormuz to ⁠pre-war levels within 30 days, while the ⁠United States ⁠would withdraw ⁠its military from the area and lift its ‌naval blockade.

Prices had ticked up on Monday and Tuesday after the United States said it launched a new round of airstrikes in southern Iran, the US military’s first major action against the Islamic Republic since the two nations initially agreed to a ceasefire. While the United States called the strikes “defensive,” Iran Supreme Leader Mojtaba Khamenei said the Middle East will “no longer serve as shields for US [military] bases.”

Without further escalation, traders have swung their focus back to President Trump’s announcement over the weekend that Washington and Tehran are close to agreeing on terms to restart peace negotiations, with a full ceasefire on all fronts and a reopening of the Strait of Hormuz as preliminary conditions.

News that three LNG tankers, headed for Pakistan and China, had successfully passed through the strait over the past few days has also kept prices from rising. Iran’s Revolutionary Guard Corps said Tuesday that 25 ships had crossed the strait after being granted permission over the preceding 24 hours, according to local media.

“The markets are just waiting for something tangible now when it comes to a deal between the US and Iran,” Capital.com analyst Kyle Rodda wrote in a client note.

A lot of good news is priced-in, leaving room for disappointment if something comprehensive isn’t announced – especially if it doesn’t offer clarity and certainty about the re-opening of the Strait of Hormuz,” Rodda added.

Both the president and Secretary of State Marco Rubio have tempered expectations over the last few days, as Trump noted that both sides must “take their time” and Rubio said in India on Tuesday that negotiating a deal with Iran could “take a few days.”

“The straits have to be open, Rubio said. “They’re going to be open one way or the other, so they need to be open.”

JPMorgan analysts said Wednesday that their base case remains a reopening of the Strait by the end of June, forced by mounting pressure on global oil inventories — though a need to rebuild those inventories will likely keep Brent prices near $100 per barrel through year-end.

Analysts have increasingly noted that global commercial oil stocks have been drawn down to levels approaching minimum amounts needed for systems such as pipelines and storage tanks to function, which could drive prices higher.

“When you have no crude in storage, THEN and only then will the spot price move to a level to destroy demand. I have no idea if it is 150, or 200, or 250,” Jeff Currie, co-chair of Abaxx Markets and prior co-head of commodities at Goldman Sachs, said.

In the US, prices at the gasoline pump notched their highest pre-Memorial Day level since Russia’s 2022 invasion of Ukraine, just as the US is about to enter summer driving season, when gasoline blends get more expensive and demand spikes. Prices averaged $4.45 per gallon nationally on Wednesday, per AAA.

Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.