Oil prices steadied on Thursday after suffering their sharpest drop in weeks, as traders assessed signs of possible diplomatic progress between the US and Iran that could eventually ease disruptions in the Middle East. Brent crude traded above $102 a barrel, while West Texas Intermediate hovered near $96, recovering some ground after both benchmarks plunged nearly 8% in the previous session.
The selloff came amid reports that Washington had floated a fresh proposal aimed at ending the war and gradually reopening the Strait of Hormuz. According to a person familiar with the matter, the US has presented Iran with a one-page memorandum of understanding that could pave the way for phased restoration of shipping through the critical waterway. Tehran is expected to respond within days.
Trades Trigger Manipulation Concerns
The sharp swings in oil prices have also triggered fresh scrutiny over possible market manipulation after a series of unusually timed trades appeared to precede key geopolitical developments. Market commentary platform The Kobeissi Letter said nearly $920 million worth of crude oil short positions were placed roughly 70 minutes before media reports signalled progress toward a potential US-Iran understanding.
Around 3:40 a.m. ET, nearly 10,000 crude contracts were reportedly shorted during a period of thin liquidity and without any obvious news catalyst. Shortly after, Axios reported that Washington and Tehran were nearing a memorandum of understanding. By early morning trading in New York, oil prices had slumped more than 12%, potentially generating an estimated $125 million profit for traders holding those bearish positions.
The volatility did not stop there. Crude rebounded sharply after reports emerged that Iran had launched a new entity known as the Persian Gulf Strait Authority, adding another layer of uncertainty to an already fragile market.
US Exports Surge Amid Supply Crunch
Global energy markets remain focused squarely on the Strait of Hormuz, the vital chokepoint that carries a significant portion of the world’s crude exports. The route has been largely shut since late February, with Tehran restricting maritime traffic while the US Navy continues blockading Iranian ports.
Despite tentative diplomatic signals, shipowners remain wary and traffic through the strait is still minimal. President Donald Trump said the US would halt its military campaign and lift the blockade if Iran agreed to the proposed terms, though he warned that military action could intensify if negotiations failed.
The conflict has increasingly become a political challenge for the White House as rising fuel prices fuel inflation concerns and weigh on consumer sentiment ahead of Trump’s upcoming summit with Chinese President Xi Jinping in Beijing later this month. Meanwhile, the supply disruption has reshaped global trade flows. US government data showed exports of refined oil products climbed to a record last week as buyers turned to American fuel supplies to offset Middle East shortages. Domestic crude inventories also declined, signalling tightening availability.
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