Global oil prices declined sharply on Wednesday as renewed optimism over a possible agreement between the United States and Iran eased fears of a prolonged supply disruption tied to the Strait of Hormuz crisis.
The market reaction followed reports suggesting progress toward a framework agreement between Washington and Tehran, raising expectations that the strategic Strait of Hormuz could reopen to smoother oil traffic after weeks of tension.
As at the time of writing, 03:50 pm (WAT), Brent crude traded at $96.34 per barrel, down 3.25 per cent, while U.S. West Texas Intermediate (WTI) crude stood at $90.34 per barrel, reflecting a 3.78 per cent decline.
Investor sentiment weakened further amid signs of improving tanker movement through the Strait of Hormuz, a key global shipping route responsible for transporting a significant share of the world’s crude exports.
Iranian state media reported that the proposed understanding could include the withdrawal of U.S. military forces from areas close to Iran and an easing of restrictions affecting maritime movement, with Iran and Oman expected to coordinate ship traffic through the Strait.
“There has been visible progress toward easing the supply crisis, with more vessels moving through the Strait of Hormuz,” PVM analyst Tamas Varga said, noting that the increase in shipping activity had intensified downward pressure on crude prices.
Despite the market optimism, analysts warned that risks remain elevated. ING strategists said traders are increasingly betting on a diplomatic breakthrough, although uncertainty around regional security and oil transit flows has not completely faded.
The Strait of Hormuz remains central to global oil market calculations because it carries a major portion of Middle East crude exports. According to the International Energy Agency (IEA), disruptions around the corridor have already affected more than 14 million barrels per day of regional oil supply.
Beyond geopolitical developments, traders are also closely watching upcoming U.S. petroleum inventory figures, which could influence the next movement in global crude prices.
For now, the oil market appears to be responding more to expectations of diplomacy than to ongoing regional tensions, with hopes of a U.S.-Iran agreement shaping trading sentiment and easing immediate supply fears.