Oil prices fall 4% after Trump raises hopes of a U.S.-Iran nuclear deal

Oil prices fell sharply on Thursday on expectations that the U.S. and Iran may soon reach a deal over Tehran's nuclear program.

International benchmark Brent crude futures with July expiry were last seen trading 3.7% lower at $63.65 a barrel, while U.S. West Texas Intermediate futures stood at $60.66, down nearly 4% for the session.

Speaking in Doha, Qatar during his Middle East trip, U.S. President Donald Trump said the U.S. was getting close to securing a nuclear deal with Iran.

"We're in very serious negotiations with Iran for long-term peace," Trump said.

His comments come shortly after a top advisor to Iran's supreme leader told NBC News that the OPEC producer was ready to sign a nuclear deal with certain conditions in exchange for the lifting of economic sanctions.

The prospect of a U.S.-Iran nuclear deal is expected to have profound implications for oil markets.

"The overnight development of a possible nuclear deal is the sole reason for the morning's weakness. If an agreement is reached, Iran agrees to halt enriching weapon grade uranium and the deal is effectively enforced, which is hard to believe, then the Persian Gulf country's crude oil exports can rise by as much as 1 [million barrels per day]," Tamas Varga, an analyst at brokerage PVM, told CNBC via email.

"It sounds price negative, but its impact will possibly be mitigated by OPEC+ rolling back on its plan to release barrels back to the market faster than originally planned," he added.

Iran's economy has deteriorated dramatically in the years since Trump in 2018 withdrew the U.S. from the Iran nuclear deal, formally titled the Joint Comprehensive Plan of Action. The agreement was brokered in 2015 along with Russia, China, the EU and U.K. under the Obama administration to curb and stringently monitor Iran's nuclear activity in exchange for sanctions relief.

Already facing several years of protests, significantly weakened currency, and a cost-of-living crisis, the Islamic Republic was hit with the hammer blow of losing its main ally in the Middle East last year, when the Assad regime collapsed in Syria. Tehran's archenemy Israel, meanwhile, killed most of the senior leadership of Hezbollah, Iran's proxy in Lebanon.

Iran's Supreme Leader Ayatollah Ali Khamenei was formerly staunchly opposed to negotiations with the U.S., but senior Iranian government officials reportedly launched a coordinated effort to change his mind, framing the decision as critical to the regime's survival.