Oil Plunges on Report US, Iran Near Interim Deal to Reopen Hormuz

The US and Iran are nearing a temporary agreement to halt the conflict in the Middle East, according to a report by the Guardian. Oil prices tumbled and global stocks advanced on expectations shipping could resume through the Strait of Hormuz.

Pakistani government officials told the Guardian that Washington and Tehran are discussing an interim deal to stop the fighting and could reach an agreement as soon as this weekend, according to the newspaper's May 7 report.

Iran is reviewing a US proposal. Rather than pursuing a comprehensive peace agreement, the two sides are prioritizing a short-term arrangement centered on maintaining a ceasefire and resuming navigation through the Strait of Hormuz.

Pakistan has recently played a key mediating role in informal talks between the US and Iran. A diplomatic official said the gap between the two sides' proposals is narrowing, with both easing somewhat from their initial hard-line positions.

President Donald Trump said in a PBS interview on May 7 that the chances of a deal were high. He also reiterated his demand that Iran send highly enriched uranium to the US.

Markets are focused on the possibility that the Strait of Hormuz could return to normal operations. The waterway handles about 20% of global oil and gas supplies.

The US and Iran have continued to clash militarily in recent days. On May 5, Iran launched missile and drone attacks toward the United Arab Emirates after a US attempt to intervene in the Strait of Hormuz, according to the report. The US later responded by attacking an Iranian tanker, further escalating tensions.

The proposal under discussion is a one-page memorandum of understanding. Key issues including Iran's nuclear program and sanctions are expected to be addressed later in direct negotiations.

Hard-liners inside Iran are also arguing that talks should be prolonged until after the US midterm elections.