Oil prices fall as US-Iran deal hopes boost risk appetite

Oil prices and the U.S. dollar are falling while risk appetite is strengthening amid growing optimism that a deal to reopen the Strait of Hormuz and normalize crude oil shipments is imminent. WTI crude oil plunged more than 5% in early trading on May 25, while risk-sensitive currencies such as the Australian dollar and the South African rand gained against the U.S. dollar. S&P 500 futures also rose, after the index closed near an all-time high on May 23. A senior U.S. official said on May 25 that the United States and Iran are close to an agreement on reopening the strait, but noted that negotiations on key wording are ongoing and final approval could take several days. In contrast, Iran's semi-official Tasnim news agency warned that the draft agreement could collapse, alleging the U.S. is creating obstacles on key provisions, including Iran's demand to unfreeze its assets. Tony Sycamore, an analyst at IG's Sydney office, wrote in a client report that the market's upward momentum from last Friday appears set to continue. He added that while a deal could still fall through, financial markets currently seem inclined to trust the reports.