Oil prices fall below $100 as U.S.-Iran tensions keep traders focused on Strait of Hormuz risks

Oil prices fell Thursday in volatile trading as investors continue to assess the latest developments in the Middle East amid concerns over renewed tensions between Iran and the U.S.

International benchmark Brent crude futures for July fell 1.85% to $99.40 a barrel. U.S. West Texas Intermediate futures for June rose 1.85% to $93.21 per barrel.

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.

Despite reports that Washington and Tehran are nearing an agreement to end the war, President Donald Trump said Wednesday Iran will be bombed "at a much higher level" if it doesn't agree to a peace deal, raising market concerns that Iran-U.S. negotiations to end the war remain fragile.

Oil futures

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," Trump said in a Truth Social post.

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.

However, Trump added that "if they don't agree, the bombing starts, and it will be, sadly, at a much higher level and intensity than it was before."

Trump's comments come after a report by Axios 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.

Following Trump's Truth Social statement, Iranian Foreign Ministry spokesperson Esmaeil Baqaei told news outlets Wednesday that Tehran is still reviewing the proposal and would present its response to mediators in Pakistan.

In an X post published after Trump's Truth Social statement, Baqaei appeared to cite the International Court of Justice, writing, "The concept of 'negotiations' requires, at the very least, a genuine attempt to engage in discussions with a view to resolving the dispute (ICJ, Judgement of 1 April 2011, para. 157)."

"It needs 'good faith', then, meaning that 'negotiations' is not 'disputation'; nor is it 'dictation', 'deception', 'extortion' or 'coercion,'" Baqaei wrote.

Marc Sievers, the former U.S. Ambassador to Oman, said on CNBC's "Access Middle East" on Wednesday that a full reopneing reopening of the Strait of Hormuz has been the "immediate focus."

"The immediate focus has been on a full reopening of the Strait of Hormuz, allowing all of this international commerce and energy to flow smoothly, tankers full of oil and so forth that have been blocked up, and that there would be no toll imposed by the Iranian IRGC on tankers to pass," he said.

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