By Elsie Kamsiyochi
Global oil markets tumbled sharply on Thursday as growing optimism surrounding a possible temporary peace agreement between the United States and Iran fueled expectations that tensions in the Middle East could soon begin to ease. Brent crude dropped more than 3%, slipping below the critical $100-per-barrel mark, while U.S. West Texas Intermediate crude also posted steep losses in another highly volatile trading session.
The decline extended the heavy selloff from the previous day, when oil prices plunged more than 7% amid reports that Washington and Tehran were moving closer to a limited agreement aimed at halting military conflict and stabilizing energy flows through the Strait of Hormuz — one of the world’s most important oil shipping routes.
Brent crude futures fell by $3.21 to around $98 per barrel, while WTI crude dropped roughly $3.15 to trade near $92. Despite the losses, traders described the market as extremely unstable, with prices swinging wildly throughout the session as investors reacted to a constant stream of geopolitical headlines and conflicting reports from the region.
Much of the market optimism came after officials and diplomatic sources indicated that the United States and Iran were discussing a short-term framework that could temporarily stop hostilities. Although the proposed agreement reportedly leaves major political disputes unresolved, investors viewed the possibility of reduced military tensions as enough to cool fears of a prolonged disruption to global oil supplies.
Additional reports from Middle Eastern media outlets suggested that understandings may have been reached regarding the gradual easing of the U.S. blockade and the phased reopening of the Strait of Hormuz. Other regional reports claimed Iran could transfer its stockpile of highly enriched uranium to a third country as part of broader negotiations. While those reports were not independently confirmed, they contributed to the sharp decline in oil prices as traders rushed to price in the possibility of improved supply conditions.
The Strait of Hormuz remains at the center of global energy concerns because nearly a fifth of the world’s oil supply passes through the narrow waterway. Any disruption there immediately impacts shipping costs, insurance premiums, and global fuel prices. Recent attacks on vessels operating near the region have intensified fears that the conflict could spiral further and choke off vital energy exports.
Still, analysts warned that the market may be reacting too quickly to unverified diplomatic progress. Several energy strategists cautioned that there is still little concrete evidence that the strait will reopen fully or that a durable peace agreement is close. They noted that negotiations remain fragile and could collapse at any moment, potentially triggering another explosive rally in crude prices.
Market analysts at major investment banks said a confirmed agreement could quickly drive Brent prices back into the $80-to-$90 range. However, they also warned that any breakdown in talks, renewed military strikes, or escalation involving regional powers could send prices surging back above $120 per barrel almost immediately.
Even if a temporary memorandum is signed, experts believe it would take weeks or even months before physical oil markets fully stabilize. Shipping networks, insurance providers, and refiners are still facing elevated risks across the region, and traders remain cautious about committing to long-term supply arrangements until there is greater clarity.
On the supply side, U.S. Energy Secretary Chris Wright said Iran’s oil production has already fallen by roughly 400,000 barrels per day as storage facilities continue filling up under the strain of sanctions and export disruptions. He added that further production cuts are possible if export routes remain constrained.
Concerns over maritime security also intensified after reports emerged that a Chinese-owned oil products tanker was attacked near the Strait of Hormuz earlier this week. The incident marked the first reported attack involving a Chinese oil vessel during the ongoing regional crisis and raised fears that more international shipping could become vulnerable if tensions persist.
Meanwhile, global diplomatic pressure is mounting. U.S. Treasury Secretary Scott Bessent urged China to intensify efforts to convince Iran to keep the Strait of Hormuz open to international shipping. The issue is also expected to feature prominently in upcoming talks between U.S. President Donald Trump and Chinese President Xi Jinping next week.
The economic fallout from the conflict is now becoming a major concern across Asia as well. Leaders from ASEAN nations discussed the crisis extensively during regional meetings on Thursday, with many countries worried about the impact of rising fuel prices on import-dependent economies. Draft statements from the summit reportedly call for renewed negotiations between Washington and Tehran and an immediate reduction in hostilities to stabilize global energy markets.
For now, traders remain locked between two competing forces: hopes for diplomacy and fears of renewed escalation. As long as uncertainty surrounds the future of the Strait of Hormuz and the broader U.S.-Iran conflict, oil markets are likely to remain highly volatile, with sharp price swings continuing to dominate global energy trading.
Source: Reuters
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