WTI Oil plunges as US-Iran compromise proposal raises hopes of de-escalation

• US Oil prices fall more than 2% on Tuesday after reaching a one-month high above $100 earlier in the day.
• A compromise proposal reportedly backed by the United States and preliminarily accepted by Iran raises hopes of easing tensions.
• The proposal includes the transfer of interest on Iranian funds frozen in Qatar and a potential international inspection of Iranian nuclear facilities.

West Texas Intermediate (WTI) US Oil falls sharply on Tuesday, trading around $95.70 at the time of writing, down 2.36% on the day. The Crude Oil retreats after reaching a one-month high above $100 earlier in the day. The reversal comes as reports of a new diplomatic proposal between the United States (US) and Iran fuel hopes of easing tensions in the Middle East.

According to Israel's Channel 12 News, a compromise proposal presented to senior Iranian officials on Tuesday by Pakistan's army chief has reportedly received approval from Washington and preliminary agreement from Tehran. Pakistan and Qatar are reportedly acting as intermediaries in efforts to bridge differences between the two countries.

The diplomatic initiative aims to prevent further escalation and pave the way for a resumption of negotiations between Washington and Tehran. Although the precise terms of the proposed agreement remain unclear, the prospect of a diplomatic breakthrough is helping to reduce the geopolitical risk premium embedded in Oil prices.

The proposal reportedly includes a partial response to Iran's demands for the release of funds frozen abroad. According to Channel 12 News, interest generated on approximately $6 billion in Iranian funds held in Qatari banks would be transferred to Iran. This provision would represent a financial concession aimed at facilitating negotiations without necessarily involving the release of the principal amount.

Furthermore, according to a Qatari report cited by Channel 12 News, Tehran has reportedly agreed to a confidential visit by the International Atomic Energy Agency (IAEA) to Iranian nuclear facilities. The inspection, which would not be publicly announced, could help address US concerns regarding Iran's nuclear program.

However, the reported arrangement has yet to receive official confirmation, and the extent of the commitments made by both sides remains uncertain. A preliminary agreement does not necessarily guarantee that a final deal will be reached.

WTI US Oil technical analysis

In the four-hour chart, WTI US Oil trades at $95.61, holding a constructive bullish bias as price remains above the 100-period simple moving average (SMA) at $92.00 and the 200-period SMA at $93.15. The market is also trading over the nearby horizontal support at $95.00, suggesting underlying demand on dips, while the Relative Strength Index (14) around 46 hints at a pause in upside momentum rather than a full reversal.

On the downside, immediate support is seen at the $95.00 horizontal level, followed by the 200-period SMA near $93.15 and the 100-period SMA at $92.00 if selling pressure extends. On the topside, the next notable resistance aligns with the prior horizontal cap at $101.05, and a sustained break above this barrier would likely reopen the path for the broader bullish trend to resume.

(The technical analysis of this story was written with the help of an AI tool. Know more.)