Oil prices fell nearly 3% on Thursday in volatile trading after the United States and Iran agreed to hold talks in Oman on Friday, easing near-term fears over potential disruptions to Iranian crude supplies. Brent crude futures settled $1.91, or 2.75%, lower at $67.55 a barrel, while U.S. West Texas Intermediate declined $1.85, or 2.84%, to $63.29.
Markets gave tentative credit to the prospect of diplomacy, though skepticism remains high. Analysts noted that uncertainty over whether talks will produce a meaningful agreement continues to inject volatility into prices. While negotiations reduced immediate supply risk concerns, traders remain cautious given ongoing U.S. military build-ups in the region and the risk of broader escalation if talks fail. Roughly 20% of global oil consumption moves through the Strait of Hormuz, a critical chokepoint for Iran and major OPEC exporters including Saudi Arabia, Iraq, Kuwait, and the UAE.
Volatility has driven increased hedging activity, with investors trading a record volume of WTI Midland Houston contracts in January as they seek to lock in prices amid Middle East risk and shifting crude flows. Broader commodity sentiment was also pressured by a stronger U.S. dollar and sharp moves in precious metals, weighing on risk appetite.
On the global supply front, discounts on Russian crude to China widened to record levels this week as sellers cut prices to maintain demand and offset the likely loss of Indian buyers. A newly announced U.S.–India trade deal includes India halting purchases of Russian crude, further reshaping global crude trade flows. Looking ahead, analysts said Argentina’s energy trade surplus could rise in 2026, supported by increasing crude output from the Vaca Muerta shale formation.