U.S. oil falls below $89 on report Iran agreement would restore Hormuz traffic in one month

U.S. crude oil prices fell about 6% Wednesday on a report Iran would restore traffic through the Strait of Hormuz as part of a framework deal with the U.S.

West Texas Intermediate futures tumbled more than 5% to $88.84 per barrel by 9 a.m. ET. International benchmark Brent oil slid moer than 4% to $95.09.

Tehran has committed to restore commercial traffic through Hormuz to pre-war levels within one month of an agreement with the U.S., according to a Reuters report citing Iranian state television.

However, Iran will manage ship traffic through Hormuz in cooperation with Oman, state television said. U.S. military forces would withdraw from the vicinity of Iran and lift the naval blocakde, the reports said.

Iran and the U.S. teetered this week between a deal and a renewed round of military escalation. U.S. forces launched strikes in southern Iran this week in a move the Pentagon described as defensive. Tehran vowed to retaliate for the attacks.

Industry veterans are skeptical that oil flows can quickly return to pre-war levels.

It will take at least four months to ramp oil flows to 80% of normal levels even if the U.S.-Iran conflict ends immediately, said Sultan Ahmed Al Jaber, the head of Abu Dhabi National Oil Co., last week. It will take until the first or second quarter of 2027 for flows to fully normalize, he said.