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Brent tumbled to its lowest level since early March on Friday, with traders growing increasingly confident that a US-Iran peace agreement could be within reach.

Brent futures settled at $87.33 a barrel, down $3.05, or 3.37%, while U.S. West Texas Intermediate crude finished at $84.88, down $2.83, or 3.23%, marking WTI's weakest close since April 17.

A memorandum between Washington and Tehran to halt the conflict in the Gulf could be signed as soon as Sunday, a Western source told Reuters on Friday, with Geneva emerging as the likeliest venue. Iranian Foreign Minister Abbas Araqchi cautioned that no memorandum of understanding had yet been signed and that terms could still shift.

The diplomatic momentum followed President Donald Trump's decision on Thursday to call off threatened air strikes against Iran. Iran's Mehr news agency reported that final negotiations on the memorandum would center on nuclear and economic issues, leaving Iran's missile programme outside the scope of discussions. Iran's IRNA news agency added that nuclear talks would commence within sixty days of any memorandum being signed.

The standoff intensified on Thursday when Iran declared a complete closure of the Strait of Hormuz, threatening to fire on any vessel attempting passage. Traffic through the strait, which normally carries a fifth of global oil and liquefied natural gas shipments, has already been severely curtailed by the conflict, though the U.S. military said on social media that commercial vessels continued transiting the waterway.

Analysts struck a more cautious note, warning that the market could hit an inflection point by late July if oil flows fail to resume. At that stage, they said, falling inventories combined with seasonally stronger demand could push prices sharply higher, toward $120 to $130 a barrel.

Written by: Farid Muzaffar