Oil prices edge lower as U.S. waits for Iran response to deal proposal

Oil prices edged lower on Thursday, as the U.S. waits for Iran's response to a proposal to end the war and reopen the Strait of Hormuz.

International benchmark Brent crude futures fell about 1% to close at $100.06 a barrel. U.S. West Texas Intermediate futures ticked 0.28% lower to settle at $94.81 per barrel.

Oil was down about 5% earlier in the session on hopes that the U.S. and Iran would strike a deal. Prices turned higher after a senior Iranian official appeared to rebuff the U.S. proposal.

Mohsen Rezaei, a member of Iran's Expediency Council, said the U.S. must pay reparations for damage done to Iran, according to the state news agency PressTV. Tehran will not allow the U.S. to propose an unrealistic plan to reopen Hormuz, Rezaei said, according to Press TV.

Iran's Foreign Ministry spokesperson Esmaeil Baqaei told news outlets Wednesday that Tehran is still reviewing the U.S. proposal and would present its response to mediators in Pakistan.

Baqaei said in a social media post that negotiations require "a genuine attempt to engage in discussions with a view to resolving the dispute." Negotiations are not dictation, deception, extortion or coercion, he said.

President Donald Trump said Wednesday that the U.S. military offensive, known as Operation Epic Fury, "will be at an end" if Iran "agrees to give what has been agreed to, which is, perhaps, a big assumption."

If that happened, the U.S. naval blockade of Iranian ports in the Gulf of Oman would "allow the Hormuz Strait to be OPEN TO ALL, including Iran," Trump wrote in a social media post.

However, the president said Iran will be bombed "at a much higher level" if it doesn't agree to a peace deal, underscoring that Iran-U.S. negotiations to end the war remain fragile.

U.S. officials told Axios on Wednesday that the U.S. and Iran were close to a one-page, 14-point memorandum of understanding that would end the war and establish a framework for further negotiations.

The deal would lift restrictions in the Strait of Hormuz, according to the Axios report. Iran would commit to a moratorium on nuclear enrichment and the U.S. would lift sanctions and release frozen funds.

Scott Chronert, Citi U.S. equity strategist, said that the duration of the conflict will affect the wider economy.

"The duration of the conflict and the implication that has for higher oil prices for longer is a big deal as it pertains to future growth expectations for many parts of the market, as well as how it influences the Fed thinking in terms of the interest rate dynamic," Chronert said on CNBC's Squawk Box.

— CNBC's Chloe Taylor and Kevin Breuninger contributed to the report