Global oil prices dropped approximately 5% on Friday. International benchmark Brent crude fell below $89 per barrel, while West Texas Intermediate traded near $86. Brent had previously closed at a two-month low on Thursday.
President Donald Trump triggered the sell-off by announcing a potential peace agreement with Iran. Trump stated the deal is in its final stages and could be signed as soon as this weekend.
The agreement could reopen the Strait of Hormuz, a chokepoint for about 20% of the world's oil trade. A signed deal would allow Iranian crude to flow freely and ease the supply disruption premiums priced into the market for weeks. Analysts suggest the market is now betting on a compromise rather than a breakdown in talks.