Reports indicate that US and Iranian negotiators are discussing a phased agreement under which Tehran would restart navigation through the Strait of Hormuz, causing crude oil prices to fall sharply in response.

International benchmark Brent crude dropped below $106 per barrel, after gaining more than 7% over the previous two trading sessions; West Texas Intermediate (WTI) retreated to around $93.

People familiar with the matter said the two countries have failed to reach a similar agreement over recent months and are now seeking a negotiating breakthrough on the sidelines of the United Nations General Assembly.

According to reports, Iranian Foreign Minister Abbas Araghchi told journalists in New York that Iran has submitted a new seven-day proposal to the US side, under which Iran would reopen the Strait of Hormuz provided certain conditions are met.

As the US-Iran conflict enters the final stretch of its seventh month, crude oil has once again seen sharp swings this week.

Mixed signals on the war outlook, improved expectations for Middle East crude flows, and market speculation that the US may impose a diesel export ban have combined to roil oil prices.

Brent crude is still up more than 70% year-to-date, continuing to fuel inflationary pressure.

Harris Khoorshid, Chief Investment Officer at Karobaar Capital LP, said: "Absent any substantive major change, Brent is likely to remain in the $100–110 range. A credible phased agreement could quickly push oil below $100 per barrel; while any renewed disruption to exports or logistics chains could send oil back to $120 per barrel."

The Strait of Hormuz is a narrow waterway connecting the Persian Gulf to global markets and is the core focal point of the current conflict.

Iran insists it holds sovereign control over the shipping lane; in peacetime, roughly one-fifth of the world's daily crude oil and natural gas supply is transported through the strait.

The US side says the strait's navigation status must not be changed, while imposing a blockade on Iranian ports.

A White House official said President Trump remains willing to talk with Iran, but stressed that the US does not need negotiations, as sanctions and the blockade have already put the US in an advantageous position.

The US president launched the war in late February, carrying out joint strikes with Israel and declaring the goal of ending Iran's nuclear program.

Carolyn Kisane, Vice Dean of the Center for Global Affairs at New York University, said: "Over the past six months, various statements and headlines from both the US and Iran have repeatedly unsettled the market, causing wild swings. Now the market wants to see real, concrete action."

Fresh fighting has erupted in the Middle East, with multiple countries deploying additional troops.

On Thursday, Iran-backed Houthi forces launched a new round of attacks, and Saudi Arabia intercepted missiles fired at the Red Sea port of Yanbu and the city of Taif.

Saudi Arabia's key East-West oil pipeline, which supplies the Yanbu terminal, remains shut down after being attacked earlier this month.

French President Emmanuel Macron said France will deploy troops to help protect an energy facility in Saudi Arabia.

Previously, the UK had agreed to provide defensive aerial refueling support to Saudi Arabia to jointly counter the Houthi threat.

The physical market is also showing signs of extremely tight supply.

On Thursday, traders paid a record premium to secure prompt crude in Cushing, Oklahoma, the main US crude storage hub.

In the European market, the key physical benchmark Dated Brent maintained a large premium to futures.

In the refined products market, Republican Senator John Hoeven of North Dakota said President Trump's economic advisory team is assessing the potential impact of a short-term US ban on diesel exports.