Global oil prices fell on Friday to lows not seen since the first week of the Iran crisis after Donald Trump claimed he was close to reaching a peace deal with Tehran.

The price of Brent crude began to tumble from about $93 a barrel in overnight trade after the US president called off further military strikes against Iran scheduled for the evening.

It traded briefly below $85 a barrel on Friday morning in fresh hope that a deal between the US and Iran could mean a reopening of the strait of Hormuz over the weekend, and was later trading at about $87.50, a 3% fall on the day.

However, the price later started to climb again, to more than $89, after Trump dismissed Iranian reports on the imminent deal, which said the described terms bore “no relation to the truth”.

Trump called off his plan for renewed strikes on Thursday, saying talks with Iran had progressed and a peace deal could lead to the reopening of trade through the strait of Hormuz as soon as this weekend.

Tehran said it had not made a final decision but large parts of the agreement were complete.

“Headlines are driving the market once again, as confidence grows that an eventual deal will be struck and the strait reopens,” said Tamas Varga, an analyst at PVM Oil Associates.

The oil market slump has taken prices to the lowest seen since early March, when Iran blocked shipments of oil and gas from leaving the Gulf following US-Israeli strikes on Tehran.

The chokehold on the vital trade route caused oil prices to reach highs of $113 a barrel before members of the International Energy Agency coordinated a release of 400m barrels of emergency crude to calm the market. Before the war started, Brent was trading at about $70 a barrel.

Oil prices have been falling in recent weeks because of a string of factors that have helped to rebalance the market, including import cuts from China and the emergence of stealth crude exports from the Gulf via “dark transits”.

Chris Beauchamp, the chief market analyst at IG, said: “The usual pesky caveats about details and signing remain, of course, but if the two sides could actually come to an agreement that reopens Hormuz, that would provide the perfect boost for a stock market rally that was beginning to look more than a little tired.”

European markets followed Asia higher on Friday, with the pan-European Stoxx 600 down 1.5%.

Goldman Sachs, one of the most influential players in the global oil market, said on Friday that it still expected oil prices to average $90 a barrel in the last quarter of the year as oil flows slowly begin to normalise from August and countries refill their depleted stockpiles.

However, the US investment bank has lowered its oil price forecast for 2027 by $5 to $80 a barrel owing to higher expected supplies from the Americas and the United Arab Emirates, and lower forecast demand.