WTI Oil falls sharply as US-Iran compromise proposal fuels hopes of de-escalation

• After touching a one-month high above $100 earlier in the session, US Oil prices are down more than 2% on Tuesday.
• Hopes of reduced tensions have increased following reports of a compromise proposal backed by the United States and provisionally accepted by Iran.
• Under the proposal, interest on Iranian funds frozen in Qatar would be transferred to Iran, while Iranian nuclear facilities could face an international inspection.

A 2.36% decline on Tuesday leaves West Texas Intermediate (WTI) US Oil trading at around $95.70 at the time of writing. Earlier in the session, the crude benchmark had reached a one-month high above $100. Reports of a fresh diplomatic proposal between the United States (US) and Iran have since raised hopes of an easing in Middle East tensions, prompting the retreat.

Washington has reportedly approved a compromise proposal that Tehran has provisionally accepted, according to Israel's Channel 12 News. Pakistan's army chief presented the proposal to senior Iranian officials on Tuesday. Reports indicate that Pakistan and Qatar are serving as intermediaries, seeking to narrow the differences between the two countries.

Preventing further escalation and clearing the way for renewed negotiations between Washington and Tehran are the objectives of the diplomatic initiative. While the proposed agreement's exact terms remain unclear, hopes of a diplomatic breakthrough are reducing the geopolitical risk premium priced into oil.

Iran's demands for access to funds frozen overseas would reportedly be partly addressed by the proposal. Channel 12 News reports that Iran would receive the interest earned on approximately $6 billion of Iranian funds held in Qatari banks. Such a financial concession would seek to support negotiations without necessarily releasing the principal amount.

A Qatari report cited by Channel 12 News also indicates that Tehran has reportedly consented to a confidential visit to Iranian nuclear facilities by the International Atomic Energy Agency (IAEA). By helping to address US concerns over Iran's nuclear programme, the inspection could support diplomatic efforts; it would not be announced publicly.

Official confirmation of the reported arrangement is still lacking, however, and uncertainty remains over how far either side has committed. Reaching a preliminary agreement does not necessarily mean a final deal will follow.

WTI US Oil retains a bullish technical bias

At $95.61 on the four-hour chart, WTI US Oil retains a constructive bullish bias, supported by its position above the 100-period simple moving average (SMA) at $92.00 and the 200-period SMA at $93.15. Holding above nearby horizontal support at $95.00 also points to underlying buying interest on dips. Meanwhile, a Relative Strength Index (14) reading of around 46 suggests that upward momentum has paused rather than reversed fully.

The $95.00 horizontal level provides the first support on the downside. Should selling pressure persist, attention would turn to the 200-period SMA near $93.15, then the 100-period SMA at $92.00. For gains to extend, the next significant resistance is the previous horizontal ceiling at $101.05. A sustained move above that level would likely clear the way for a resumption of the broader bullish trend.

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