Oil prices extend decline as US sends peace proposal to Iran via Pakistan, Trump warns deal not final

Oil prices extended losses on Thursday as diplomatic signals emerged from the US-Iran conflict, with international benchmark Brent crude falling 3.5% to $97.5 per barrel as of 0715GMT, while US benchmark West Texas Intermediate (WTI) declined over 3% to $92 per barrel.

The decline followed reports that the US sent a one-page memorandum of understanding to Iran through Pakistani intermediaries, aimed at formally ending the conflict and creating a framework for the gradual reopening of the Strait of Hormuz. Tehran is expected to respond within days after confirming it is reviewing the US proposal, though broader negotiations over Iran's nuclear program are expected to take place at a later stage.

US President Donald Trump cautioned that a deal has not yet been finalized, saying it would be a "big assumption" that Iran would accept the proposal. He also warned that the US could resume military strikes if Tehran fails to comply.

Prices also came under pressure after Trump temporarily reversed his plan to assist commercial vessels transiting the Strait of Hormuz. The reversal followed a decision by a key Gulf ally to suspend the US military's use of its bases and airspace for the operation, NBC News reported Wednesday, citing sources.

The Strait of Hormuz is a key chokepoint for global oil and liquefied natural gas flows, and weeks of conflict in the region had driven prices sharply higher amid fears of supply shortages. The latest developments come after Iran submitted a 14-point peace proposal on May 2, which Trump had greeted with skepticism.