Oil prices have dropped following reports that the US and Iran are close to a deal to end the war.

Brent crude futures, the global benchmark oil price, fell to below $102 (£75) a barrel after the reports. The price was over $108 earlier in the day.

The US believes it is getting close to a one-page document which will end the war and set up more detailed nuclear negotiations, according to news outlet Axios.

Oil prices are still much higher than the $70 a barrel they were hovering around before the start of the US-Israel war with Iran, which has caused caused production and transportation of oil in the region to slump.

Central to the conflict is Iran's threat to attack oil ships crossing the Strait of Hormuz, a narrow waterway south of the country, in response to US-Israeli strikes since 28 February.

About a fifth of global oil and gas shipments usually cross the strait, which has been effectively closed for weeks. Global gas prices have also soared since the conflict began.

On 8 April, the US and Iran agreed a ceasefire, which caused oil prices to slump and stock markets to jump.

However, on Sunday, US President Donald Trump said the US military would guide ships through the Strait of Hormuz, dubbing it "Project Freedom", leading to a rise in attacks in the strait from both Iran and the US.

Trump then said on social media on Tuesday he would pause the operation "for a short period of time to see whether or not the Agreement can be finalized and signed".

He added that "Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran". Trump said the US would continue to block ships transiting to and from Iranian ports, a move designed to put pressure on Iran's economy.

On Wednesday, Axios reported that the US believes it is getting close to a one-page memorandum of understanding to end the war, citing two U.S. officials and two other sources briefed on the issue.

That would, it is claimed, declare an end to the war in the region and start a 30-day period of negotiations on a deal to re-open the strait, limit Iran's nuclear programme and lift US sanctions.

While the reports suggest this is the nearest to agreement that both sides have been since the conflict got under way, the response in the markets has been relatively cautious, underscoring that nothing has been settled as yet.

The US is believed to be awaiting response from Iran on several key points within the next 48 hours.

European stock markets have extended their gains following the reports, while US shares are expected to open sharply up.

US Secretary of State Marco Rubio also told reporters on Tuesday the initial US-Israeli offensive in Iran was over, as Washington's objectives had been met.

"We would prefer the path of peace. What the president would prefer is a deal," Rubio said.

Iran has not responded to Rubio's remarks. The country's parliamentary speaker Mohammad Ghalibaf said earlier: "We know well that the continuation of the status quo is intolerable for America, while we are just getting started."

Project Freedom, which Trump said was meant to ease the flow of energy through the channel, had tested the ceasefire between the sides.

The US said it struck several Iranian "fast boats" in the channel, while the United Arab Emirates also accused Iran of launching strikes on one of its oil ports - a claim Tehran has denied.