Crude oil prices edged higher on Wednesday as traders reassessed expectations of a swift nuclear agreement between the United States and Iran.
Earlier in the week, optimism over potential diplomatic progress triggered a sell-off on the assumption that additional Iranian supply could return to the market. However, sentiment shifted as doubts emerged about how quickly negotiators could finalise a deal.
Benchmarks Recover After Two-Week Lows
As of 11 a.m. WAT, Brent crude traded at $67.71 per barrel, up $0.29 or 0.43 percent. West Texas Intermediate stood at $62.61 per barrel, gaining $0.28 or 0.45 percent.
Both benchmarks had fallen roughly 2 percent in the previous session, touching their lowest levels in two weeks before rebounding.
Strait of Hormuz Tensions Add Risk Premium
The recovery also followed reports that Iran partially restricted traffic in the Strait of Hormuz during a military drill. The move served as a reminder of Tehran’s ability to disrupt flows through one of the world’s most critical oil chokepoints.
Iran often raises the possibility of closing the Strait during periods of heightened tensions with the United States and Israel. However, it has stopped short of fully shutting the waterway, as such action could prompt a swift military response from Washington.
The United States has expanded its naval presence in the Persian Gulf in recent weeks, reinforcing its capacity to secure the route. Any sustained disruption would likely escalate geopolitical tensions and push oil prices higher.
Diplomatic Signals Remain Mixed
Speaking in Geneva, Iran’s Foreign Minister Abbas Araqchi said negotiators had reached an understanding on the “guiding principles” of a possible agreement. He noted, however, that finalising a comprehensive deal would require further work.
Analysts continue to urge caution. Sugandha Sachdeva of SS WealthStreet told Reuters that crude prices appear set for a technical rebound. Even so, she warned that a final agreement remains distant and diplomatic momentum could weaken.
Meanwhile, Eurasia Group estimates a 65 percent probability that the United States could launch a military strike against Iran by April, highlighting the fragile security environment.
Market Outlook
For now, oil markets continue to respond quickly to geopolitical developments. While hopes of a breakthrough initially pressured prices, renewed uncertainty and regional tensions have restored a degree of risk premium to crude benchmarks.
Traders will likely monitor diplomatic signals from Geneva and military activity around the Strait of Hormuz for clearer direction in the sessions ahead.