US-Iran deal odds hit 85% as uncertainty keeps oil on edge

A senior Trump administration official put the odds of signing an interim peace deal with Iran at 80 percent to 85 percent, sending Brent crude tumbling as much as 5.1 percent to the lowest since the war's early days.

"There is still a lot of uncertainty about the prospect of an agreement," said Dan Pan, a New York-based economist at Standard Chartered. "If we see risk sentiment pull back on sudden news, I would not be surprised."

Brent futures fell to trade near the lowest level since late February, when the US and Israel launched their joint bombardment of Iran. The global benchmark, still up almost 50 percent this year, has retreated from an April high of $125 a barrel. European natural gas slumped as much as 8.4 percent. The moves followed Trump's announcement Thursday that he had canceled plans for new strikes on Iran.

The deal — which would reopen the Strait of Hormuz, remove enriched uranium from Iran and ease US sanctions — faces hurdles including approval from Supreme Leader Mojtaba Khamenei and opposition from Israel. A signing could come as soon as the G7 summit in Evian, France, from June 15-17, but the senior US official said no timing or location has been settled.

Conflicting Signals Undermine Confidence

Iranian Foreign Minister Abbas Araghchi said on X that the "Islamabad Memorandum of Understanding has never been closer," a post that Trump republished. Yet Iran's foreign ministry said Tehran was still reviewing the draft, and the terms require Khamenei's sign-off, according to a European official. Communicating with the supreme leader, who has been in hiding since the conflict erupted, can take days, mediators from Qatar and Pakistan have found.

The disconnect extends to the deal's substance. The senior US official said the agreement would ensure Iran does not have a nuclear weapons program while allowing civilian nuclear energy, remove enriched material from the country and end both sides' blockade of the Strait of Hormuz. In return, the US would ease sanctions and allow Iran to reintegrate into the global economy.

But Iranian state media offered a different picture. Mehr news agency reported the deal includes the release of $24 billion of Iranian funds held in foreign banks, a US withdrawal of forces from areas near Iran, the lifting of oil sanctions and reconstruction plans worth around $300 billion. The senior US official dismissed those reports as "domestic propaganda."

Oil's Risk Premium Hangs in the Balance

The Strait of Hormuz handled about 140 ships a day before the conflict erupted. That number has crept up in recent weeks but remains far below pre-war levels. One diplomat said the US and its allies would aim to restore normal shipments within about a month of a deal being signed, though clearing mines Iran may have placed in the strait could complicate that timeline.

The last time oil prices fell this sharply on diplomatic news was in early May, when similar breakthrough claims proved premature and Brent rebounded 8 percent within a week. If the current talks collapse, the risk premium could snap back quickly, pushing crude back toward $100 as the market reprices the probability of a prolonged closure of the world's most important energy chokepoint.

Israel, which is not party to the negotiations, has signaled it would prefer more strikes to further degrade Iran's military. Prime Minister Benjamin Netanyahu's minimum expectation is that any end-of-war deal ensures highly enriched uranium is removed from Iran, according to a person familiar with the matter. The US and Israel initially wanted any agreement to also curb Iran's ballistic missile program and support for proxy groups such as Hezbollah and the Houthis — issues that may not be covered in the interim memorandum.

This article is for informational purposes only and does not constitute investment advice.