NEW YORK - Oil prices slumped to two-week lows on Wednesday after a Pakistani source said that the United States and Iran were nearing an initial peace deal.

Brent crude futures were $8.04, or 7.32%, lower at $101.83 a barrel by 10:27 a.m. ET (1427 GMT), having earlier dropped below $100 for the first time since April 22. U.S. West Texas Intermediate lost $7.16, or 7%, to $95.11.

A source from mediator Pakistan said the United States and Iran were closing in on an agreement on a one-page memorandum of understanding.

Iran said on Wednesday it was reviewing a new U.S. proposal. An Iranian foreign ministry spokesperson, cited by Iran's ISNA news agency, said Iran would convey its response soon via Pakistan.

Iran had said earlier that it would only accept a fair and comprehensive agreement.

U.S. media outlet Axios reported that the U.S. expects Iranian responses on several key points in the next 48 hours, citing sources saying this was the closest the parties had come to an agreement since the war began.

Both crude contracts hit their lowest in two weeks, with Brent hitting an intra-session low of $96.75 before paring losses after U.S. President Donald Trump said it was "too soon" to consider face-to-face talks with Tehran, and as a senior Iranian MP said the U.S. proposal was more of a wish list than a reality.

The U.S. military said on Monday that it destroyed several Iranian small boats as part of efforts to help stranded ships exit the Strait of Hormuz.

"A deal announcement would move futures further immediately, in fact even the potential of a deal is already triggering a decline in oil prices," said Rystad Energy chief oil analyst Paola Rodriguez-Masiu.

However, the global oil flow would take time to normalize even if the strait is restored. "The six-to-eight-week lag between credible access conditions and real flow normalization is not a conservative estimate, it is a structural feature of how shipping markets work," Rodriguez-Masiu added.

Crude oil supply losses from halted marine traffic through the strait since the war began in February have driven up prices, with Brent trading last week at its highest since March 2022.

The Strait of Hormuz closure has resulted in a drawdown in global oil and fuel inventories as refineries try to offset production shortfalls.

U.S. crude oil inventories fell for a third week, while gasoline and distillate stocks also declined, market sources said on Tuesday, citing American Petroleum Institute figures.

Crude stocks fell by 8.1 million barrels in the week ended May 1, the sources said. Gasoline inventories were down by 6.1 million barrels from a week earlier and distillate inventories fell by 4.6 million barrels, the sources said.

Official numbers from the EIA, the statistical arm of the U.S. Department of Energy, are due at 1430 GMT.

(Reporting by Nicole Jao in New York, Shadia Nasralla and Robert Harvey in LondonAdditional reporting by Helen Clark in Melbourne and Jeslyn Lerh in SingaporeEditing by David Goodman, Kirsten Donovan and Nick Zieminski)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published May 6, 2026 at 11:15 AM.

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