BY COMFORT OGBONNA
Oil prices fell for a second consecutive day on Wednesday as growing expectations of easing tensions in the Middle East raised the possibility that disrupted crude supplies could soon return to global markets. The shift in sentiment followed comments from U.S. President Donald Trump suggesting that a potential peace agreement with Iran may be within reach, signaling a possible end to the ongoing conflict that has strained oil flows in the region.
Brent crude futures dropped by $1.69, or 1.5%, to $108.18 per barrel as of 0640 GMT, adding to a sharp 4% decline recorded in the previous trading session. Meanwhile, U.S. West Texas Intermediate crude futures fell $1.67, or 1.6%, to $100.60 per barrel, after closing nearly 3.9% lower the day before. The back-to-back losses reflect a cooling in the risk premium that had pushed oil prices higher in recent weeks amid fears of prolonged supply disruptions.
The market reaction comes after an unexpected announcement from Trump on Tuesday, in which he said the United States would temporarily pause an operation designed to escort commercial vessels through the strategically vital Strait of Hormuz. The move, he explained, was based on progress toward a broader diplomatic agreement with Iran, though he did not provide specific details about the terms or timeline of the potential deal. Iranian authorities have yet to issue an official response.
Analysts say the development could mark an early step toward de-escalation in one of the world’s most critical oil-producing regions. According to Anh Pham, a senior research specialist focusing on oil markets, the announcement has raised optimism that vessels stranded in the Gulf could soon resume normal operations. This, in turn, could gradually restore supply flows that have been constrained by the conflict and related security concerns.
Despite the recent price declines, uncertainty remains a key factor in the market. Experts caution that even if a diplomatic breakthrough is achieved, it may take time for oil shipments to normalize fully. Infrastructure challenges, lingering geopolitical risks, and cautious market sentiment could all delay the return of stable trade flows.
Trump also emphasized that while the escort operation—referred to as “Project Freedom”—would be paused temporarily, the broader U.S. naval blockade of Iranian ports would remain firmly in place. In a social media post, he stated that both sides had agreed to maintain existing restrictions while allowing a short window to finalize and potentially sign a comprehensive agreement.
The announcement followed closely on the heels of remarks from U.S. Secretary of State Marco Rubio, who had earlier briefed reporters on ongoing efforts to ensure safe passage for oil tankers navigating the Strait of Hormuz. The U.S. military has been actively involved in the region, reporting that it had recently neutralized multiple Iranian small boats, as well as cruise missiles and drones, while escorting vessels through the contested waterway.
The disruption in the Strait of Hormuz—a critical chokepoint for global oil shipments—has already had a noticeable impact on supply levels. With fewer shipments reaching international markets, global inventories have been drawn down as refineries work to compensate for the shortfall. This tightening of supply had been a key driver behind the recent surge in oil prices, with Brent crude hitting its highest level since March 2022 just last week.
Further supporting the narrative of constrained supply, recent data indicates a significant decline in U.S. crude oil inventories. Industry figures show that crude stockpiles fell for a third consecutive week, dropping by 8.1 million barrels in the week ending May 1. Gasoline inventories also declined by 6.1 million barrels, while distillate stocks—which include diesel and heating oil—fell by 4.6 million barrels compared to the previous week.
These inventory drawdowns suggest that demand remains robust even as supply disruptions persist, adding another layer of complexity to the market outlook. While the prospect of a peace agreement offers hope for stabilization, traders and analysts alike are likely to remain cautious until clearer signals emerge regarding the durability of any diplomatic progress and the speed at which oil flows can return to normal.
In the near term, oil markets are expected to remain highly sensitive to geopolitical developments, with price movements closely tied to headlines surrounding negotiations, military activity, and shipping conditions in the Gulf region.
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