Key Points:
- Brent falls below $100 per barrel amid diplomatic signals
- US-Iran backchannel talks improve market sentiment
- Strait of Hormuz risk premium begins to unwind
- Analysts warn volatility will persist without concrete deal
ISLAMABAD: Global oil prices fell sharply (4-6%) on Wednesday after US President Donald Trump said Washington and Tehran were “in negotiations right now”, raising expectations of a diplomatic breakthrough and reducing fears of prolonged supply disruptions.
The remarks, delivered from the Oval Office, signalled a shift from earlier escalation, with Trump confirming he had stepped back from threats to target Iranian energy infrastructure.
“I’ve pulled back based on the fact we’re negotiating,” he said, adding that “they’re talking to us, and they’re talking sense.”
Benchmark Brent crude fell by $4.99, or 4.78 per cent, to $99.50 per barrel immediately after Trump remarked on talks, reflecting a sharp unwinding of the war premium built into prices earlier this month.
US West Texas Intermediate (WTI) crude futures dropped by $3.84, or 4.16 per cent, also retreating sharply.
Other key crude benchmarks followed suit, including Middle Eastern grades, with Saudi Aramco’s official selling prices and Arab Light-linked benchmarks reflecting similar downward adjustments amid softer Asian demand expectations.
The downturn follows reports of an intensifying US diplomatic push, including a 15-point proposal aimed at ending hostilities, reportedly conveyed to Tehran via Pakistan.
Details of the plan remain largely confidential, and it is unclear how widely it has been circulated within the Iranian leadership. Israel, declaring that it was not part of any ceasefire talks, keeps the cautions still high.
Energy-focused reporting, including analysis by MatisGlobal, noted that recent price swings are being driven more by shifts in perceived worst-case scenarios than by any fundamental change in baseline supply.
The analysts highlighted that traders are rapidly unwinding speculative positions as the risk of escalation recedes, even if a concrete supply recovery seems distant.
The Strait of Hormuz remains central to market concerns, as nearly one-fifth of global oil supply passes through the narrow waterway.
Earlier disruptions and threats to shipping had triggered sharp price spikes, but improving sentiment has now partially reversed those gains.
However, analysts caution that the decline is largely sentiment-driven rather than based on tangible recovery in supply.
Iran has denied any direct negotiations with Washington, and its military leadership has warned that oil markets are unlikely to stabilise until regional security is firmly established.
Iran’s posture on even indirect talks, hardline conditions for a ceasefire, and lack of trust in the US after being attacked earlier during the negotiations highlight the mere fragility of current optimism.
Market observers warn that without a concrete agreement and sustained de-escalation, oil prices are likely to remain volatile, with sudden swings possible in response to political or military developments.
