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Oil prices edged lower in Wednesday trade in Asia after US President Donald Trump raised hopes for an agreement with Iran to end the war.
Trump said the US would pause its operation to guide ships through the key Strait of Hormuz trade route – a move that triggered an escalation in attacks in the region – to see if a deal could be made.
Brent, the global benchmark for crude, fell by 1.7% to $108 (£79.56) a barrel, while US-traded oil fell by 1.6% to $100.60.
The price of oil jumped by more than 6% earlier in the week as attacks across the Middle East intensified, but has since gradually eased.
Global energy prices have surged since Tehran threatened to attack ships trying to cross the Strait of Hormuz, in retaliation against US-Israeli strikes since 28 February.
About a fifth of global oil and gas shipments cross the strait.
Oil prices overall have been higher since the US-Iran conditional ceasefire, which was announced on 8 April and later extended.
Trump said on social media on Tuesday that Project Freedom, the name of the US-led effort to move ships through the channel, would be “paused for a short period of time to see whether or not the Agreement can be finalized and signed”.
He added that “Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran”. Trump said the US would continue to block ships transiting to and from Iranian ports – a move designed to put pressure on Iran’s economy.
To traders, pausing Project Freedom is “a sign that Washington is willing to give diplomacy another chance,” said Charu Chanana from investment firm Saxo.
She added, however, that it is not a turning point.
“The key question for oil traders is whether this leads to real progress in reopening trade through the Strait of Hormuz,” said Chanana, an investment strategist. “For now, there is little evidence of that.”
US Secretary of State Marco Rubio also told reporters that the initial US-Israeli offensive in Iran was over, as Washington’s objectives had been met.
“We would prefer the path of peace. What the president would prefer is a deal,” Rubio said.
Iran has not responded to Rubio’s remarks. The country’s parliamentary speaker Mohammad Ghalibaf said earlier: “We know well that the continuation of the status quo is intolerable for America, while we are just getting started.”
Project Freedom, which Trump said was meant to ease the flow of energy through the channel, had tested the ceasefire between the sides.
The US said it struck several Iranian “fast boats” in the channel, while the United Arab Emirates also accused Iran of launching strikes on one of its oil ports – a claim Tehran has denied.
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