Oil Price Today (May 6): Crude oil falls below $100, dives nearly 10%. What's behind the plunge?

Oil prices extended their decline in afternoon trade on Wednesday, falling for a second consecutive session after Axios reported that the White House believes it is nearing an agreement with Iran on a one-page memorandum of understanding to end the war and lay the groundwork for broader nuclear negotiations.

The U.S. is expecting Iran’s response on several key issues within the next 48 hours. While no final agreement has been reached, the report added that the two sides are closer than at any point since the conflict began.

Crude oil price on May 6

Brent crude futures dropped $10.35, or 9.5%, to $99.60 a barrel after hitting their lowest level in nearly two weeks. U.S. West Texas Intermediate fell $6.77, or 6.6%, to $95.50. Both benchmarks had declined around 4% in the previous session.

The latest development comes after U.S. President Donald Trump hinted at progress toward resolving the conflict. Trump said on Tuesday that an operation to escort ships through the Strait of Hormuz would be paused for a short period, pointing to movement toward a broader agreement with Iran.

He added that the U.S. Navy would continue its blockade of Iranian ports. The Strait of Hormuz, which normally handles about one-fifth of global oil and natural gas shipments, has largely been shut since the U.S.-Israeli conflict with Iran began on February 28.

The disruption has tightened global supplies, pushing Brent prices last week to their highest level since March 2022.

In a social media post, Trump said both sides had agreed that while the blockade would remain fully in place, “Project Freedom” would be paused temporarily to allow time for the agreement to be finalised.

On Tuesday, Washington played down the prospect of a return to active war, with Defense Secretary Pete Hegseth confirming the truce that began just under a month ago is still in place. Meanwhile, General Dan Caine, the chairman of the Joint Chiefs of Staff, said attacks by Tehran on vessels in the Persian Gulf and the United Arab Emirates didn’t constitute a breach of a ceasefire.

Experts still worried

On the outlook, Haitong Futures noted that the current ceasefire could be temporary. A lack of progress in U.S.-Iran talks may lead to renewed escalation, potentially pushing oil prices higher.

Nuvama Institutional Equities echoed a similar view, stating that an extended shutdown of the Strait of Hormuz, which carries around 20 million barrels per day, could lift crude prices into the $110 to $150 range.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)