The United States Oil Fund LP (USO) experienced a sharp pre-market decline of 5.02% on Thursday, mirroring a significant drop in underlying crude oil prices. The move reflects growing market optimism that a diplomatic breakthrough could soon end the conflict in the Middle East and restore vital oil shipments through the Strait of Hormuz.

Multiple news reports indicate that the United States and Iran are nearing an agreement on a memorandum of understanding aimed at halting hostilities. This development has fueled expectations that the critical Strait of Hormuz—a chokepoint for roughly one-fifth of the world's oil supply that has been heavily restricted since the conflict began—could gradually reopen. The prospect of increased oil supply has immediately pressured prices, with Brent crude futures falling below $100 per barrel.

Analysts note that a lasting peace deal would likely lead to a rapid resumption of shipping, releasing oil from tankers stranded in the region and storage tanks filled to capacity. This potential influx of supply into a market that has been defined by shortage and disruption is the primary driver behind the sharp correction in oil prices and related securities like USO during the pre-market session.