Oil prices are plunging on Wednesday following reports that the U.S. and Iran are making progress towards a memorandum of understanding to end the war.
Both Brent crude and West Texas Intermediate dropped, with the former plunging by over 6.5% and the latter by more than 7%. The international benchmark stood below $103 at 8:52 a.m. ET, while the U.S.'s clocked in at $94.83.
The development follows an Axios report claiming that Washington and Tehran are getting close to a one-page memorandum of understanding with 14 points to end the war and usher detailed nuclear negotiations.
The U.S. expects Iran to response to key issues before the end of the week. Among them are a moratorium on nuclear enrichment and lifting the blockade on the Strait of Hormuz. The U.S., in turn, would lift sanctions on the country and end its own restrictions in the key waterway.
If agreed, the document would declare an end to the war and begin a 30-day period in which the Strait of Hormuz would gradually reopen while discussions take place. Should they collapse, the U.S. would be able to resume its blockade and military actions.
Parties are currently negotiating a moratorium of at least 12 years, a middle ground between the U.S.'s proposal of 20 years and Tehran's five. The U.S. also wants for any violation from Iran to extend the moratorium.
Iran, on its end, would commit to never seek a nuclear weapon or conduct any related activities, including operating underground facilities. The country would also allow enhanced inspections and agree to remove its highly enriched uranium from the country.
However, the outlet added, White House officials believe it could be hard for Iranian leadership to reach consensus given the existing internal rifts.
Secretary of State Marco Rubio reacted to the development, saying: "This is highly complex and technical. But we have to have a diplomatic solution that is very clear on the topics they are willing to negotiate on and the extent of the concessions they are willing to make at the front end in order to make it worthwhile."
He went on to warn that some Iranian leaders are "insane in the brain" and the outcome of the deal is unclear.
President Donald Trump also signaled openness to reaching the deal but threatened to resume the war should talks fail. "Assuming Iran agrees to give what has been agreed to, which is, perhaps, a big assumption, the already legendary Epic Fury will be at an end, and the highly effective Blockade will allow the Hormuz Strait to be OPEN TO ALL, including Iran. If they don't agree, the bombing starts, and it will be, sadly, at a much higher level and intensity than it was before."
