Oil prices tumbled more than 5% on Wednesday as markets focused on signs of progress in negotiations between the United States and Iran aimed at ending the conflict and gradually reopening the Strait of Hormuz. Brent crude settled down $5.29, or 5.31%, at $94.29 per barrel, while U.S. West Texas Intermediate (WTI) crude fell $5.21, or 5.55%, to close at $88.68. Both benchmarks touched their lowest levels in a month during the session, erasing the previous day’s gains.
Investor sentiment shifted after U.S. Secretary of State Marco Rubio said negotiators had made some progress in talks with Iran, though President Donald Trump cautioned that significant disagreements remain. Iranian media also reported unresolved issues despite speculation surrounding a possible framework agreement.
Reports from Iranian state television suggested a tentative framework could restore shipping through the Strait of Hormuz within a month and potentially ease the U.S. naval blockade on Iranian vessels. Under the reported arrangement, Iran and Oman would jointly oversee shipping traffic in the strait, while U.S. forces would pull back from the region. Washington, however, denied that any finalized agreement had been reached.
Markets also reacted to comments from Iranian military officials indicating that the likelihood of renewed fighting had diminished, boosting hopes that the worst of the supply disruption may eventually ease.
Shipping activity through the strait showed modest improvement. Data indicated that a Chinese-operated COSCO oil products tanker was transiting the chokepoint on Wednesday, following the passage of two crude tankers over the prior day. Even so, overall traffic remained far below pre-war levels.
Analysts said the gradual return of vessels through the waterway is reducing some of the extreme supply-risk premium that had driven oil prices sharply higher over recent months.
“The increase in shipping activity is reinforcing expectations that the critical waterway could gradually reopen,” said Mark Schaefer of Liquidity Energy, noting that markets are beginning to price in the possibility of improved global energy flows.
Despite the decline in oil prices, tensions remain elevated across the region. The United States carried out additional strikes in Iran on Tuesday, while Israel intensified military operations in Lebanon, complicating broader diplomatic efforts.
The conflict has removed more than 14 million barrels per day of Middle Eastern oil supply from global markets, according to the International Energy Agency, contributing to one of the largest energy disruptions in recent history.
There were also emerging signs that sustained high energy costs are beginning to weigh on demand. Sources told Reuters that India’s two largest airlines are sharply reducing planned domestic flights for June and July amid rising fuel costs and weakening travel demand.