Oil prices fell about 6% on Wednesday after U.S. President Donald Trump said negotiations with Iran were entering their final stages, raising hopes for a potential easing of tensions in the Middle East. Even so, investors remained cautious as major disruptions to regional oil supplies continued.
Brent crude futures settled down $6.26, or 5.63%, at $105.02 a barrel, while U.S. West Texas Intermediate crude fell $5.89, or 5.66%, to close at $98.26.
Trump said talks with Iran were progressing but warned that additional military action remained possible if Tehran refused to agree to a deal.
Iranian foreign ministry spokesperson Esmaeil Baghaei said Tehran was prepared to cooperate with neighboring coastal states on protocols for safe shipping through the Strait of Hormuz, though he did not provide specifics.
Despite the signs of diplomatic progress, analysts warned that oil markets remain vulnerable to prolonged supply disruptions.
“You’ve got to take all these pronouncements with a grain of salt these days, but the market was also quick to reward it and price in the hope of a resolution,” said John Kilduff, partner at Again Capital.
Analysts at Citi said they still expect Brent crude could climb to $120 a barrel in the near term, arguing markets are underestimating the risk of sustained supply outages. Wood Mackenzie warned prices could approach $200 a barrel if the Strait of Hormuz remains largely closed through the end of the year.
PVM analysts also cautioned that global oil inventories could become critically depleted, though they noted traders appear relatively complacent about the broader risks posed by the conflict.
The premium for near-term Brent contracts over six-month deliveries — a key indicator of supply tightness — remained elevated near $20 a barrel, though below peaks above $35 reached last month.
Russian Deputy Prime Minister Alexander Novak said some countries were easing restrictions on Russian oil exports because global energy markets could not function effectively without those supplies.
Shipping activity through the Strait of Hormuz remained severely constrained. Three supertankers carrying roughly 6 million barrels of crude destined for Asia crossed the waterway on Wednesday after waiting in the Gulf for more than two months. Still, vessel traffic remained far below the roughly 130 ships per day that transited the strait before the conflict began.
UAE energy giant Abu Dhabi National Oil Company said it could take at least four months to restore flows to 80% of pre-war levels.
Meanwhile, governments continued relying heavily on commercial inventories and strategic reserves to offset supply shortages.
In the United States, the Energy Information Administration reported that crude stockpiles fell by 7.9 million barrels last week to 445 million barrels, far exceeding analysts’ expectations for a 2.9 million-barrel decline.