Crude oil tumbles over 4% in futures trade on hopes of Hormuz breakthrough

New Delhi: Crude oil prices fell more than 4 per cent in futures trade on Monday, tracking a sharp selloff in global markets amid growing optimism over a possible breakthrough between the US and Iran that could pave the way for reopening the Strait of Hormuz.

On the Multi Commodity Exchange (MCX), crude oil for June delivery plunged by Rs 412, or 4.49 per cent, to Rs 8,756 per barrel in a business turnover of 13,313 lots.

Analysts said easing geopolitical concerns and expectations of restoration in oil flows through the Strait of Hormuz dragged crude prices.

According to reports, Iran and the United States have reached a broad framework to end their over two-month-long conflict, though a potential memorandum of understanding does not yet specify arrangements related to the management of the Strait of Hormuz.

It also suggested that both sides have made progress on several issues, analysts cautioned that a final agreement between Tehran and Washington cannot yet be considered imminent.

In the international markets, Brent crude futures dropped below the USD 100 per barrel mark, declining USD 4.80, or 4.79 per cent, to USD 95.41 per barrel.

West Texas Intermediate crude also plunged USD 5.07, or 5.25 per cent, to USD 91.53 per barrel on the NYMEX.

Earlier reports quoting a senior White House official indicated that a framework agreement had been reached between the two countries. The proposed arrangement reportedly includes reopening the Strait of Hormuz, a key global shipping route through which nearly one-fifth of the world's oil passes.

The Strait has remained largely shut to tanker traffic for weeks, pushing oil prices sharply higher and intensifying fears of another inflationary shock globally.

In return, the US is expected to lift its naval blockade on Iranian ports under the proposed deal, reports added.

Analysts, however, said that even if a peace agreement is reached soon, restoring normal oil flows through the waterway could take several months and energy prices may not immediately return to pre-war levels.

Meanwhile, US President Donald Trump said he had instructed negotiators "not to rush into a deal", adding that the American blockade on Iranian ports would continue until an agreement is "reached, certified, and signed".

The sharp correction in crude prices also lifted sentiment in global equity markets, with stocks across Europe and Asia advanced on hopes that easing energy prices could help cool inflationary pressures and reduce risks to global economic growth.