Oil prices fell sharply on Wednesday after President Trump announced that the United States was pausing a days-old U.S. operation to escort ships through the Strait of Hormuz and claimed there had been “great progress” toward a deal with Iran.
Markets had been uneasy after a sharp increase in oil prices on Monday, when Mr. Trump announced the naval operation in the crucial oil and gas shipping route, prompting Iran to escalate its threats and putting further pressure on the already fragile truce.
Mr. Trump made the sudden reversal on Tuesday, a day after the U.S. Navy began efforts to guide ships through the vital waterway, which remains effectively closed. Iran has effectively blocked transit through the strait since the U.S. and Israel attacked Iran in late February, and the United States imposed a blockade of Iran’s ports after a cease-fire took effect in early April.
Mr. Trump said that the naval escort mission would be paused while negotiators try to finalize a deal with Iran to end the war. He said the decision followed requests from Pakistan, a key mediator, and from other countries that he did not name.
He did not elaborate on what he meant by progress in the efforts to reach an agreement.
Still, the decision helped ease the mood in energy markets, which rose sharply after the war began and have been fluctuating in response to disruptions to energy supplies and the effects on economies around the world. The price of Brent crude, the global benchmark for oil, was down 2 percent to about $108 a barrel on Wednesday. West Texas Intermediate crude, the U.S. benchmark, dropped 2 percent to around $100 a barrel.
The United States and Iran both claim to have control over the Strait of Hormuz. Iran announced a new mechanism on Tuesday to oversee traffic through the channel, Iranian state news reported. These reports did not say how the new system would work and what new rules would be enforced.
Mr. Trump said on Tuesday that Iran knew what actions would violate the cease-fire, and dismissed recent attacks by Iran aimed at American vessels as minor.
More than two months into the Iran war, some 1,600 ships remain stranded in dangerous conditions in the Strait of Hormuz, with roughly 20,000 seafarers on board.