By Elsie Kamsiyochi
Global oil prices plunged sharply on Wednesday after U.S. President announced that negotiations between the United States and Iran had entered what he described as the “final stages.” The remarks sparked optimism among investors that a diplomatic breakthrough could reduce tensions in the Middle East and ease fears of prolonged disruptions to global oil supplies.
Despite the market reaction, uncertainty remains high, as energy analysts warn that geopolitical risks in the region continue to threaten supply chains and could still trigger significant price volatility in the months ahead.
Oil benchmarks suffered steep losses during trading, with Brent crude dropping by nearly 4.3% to around $106.50 per barrel, while U.S. West Texas Intermediate (WTI) crude slipped roughly 4% to trade below the psychologically important $100 mark. The declines marked the sharpest single-day drop in oil prices in both percentage and dollar terms in nearly two weeks.
The selloff came shortly after Trump addressed reporters, offering a cautiously optimistic update on negotiations with Iran while also warning that military escalation remained possible if diplomatic efforts failed.
“We’re in the final stages with Iran,” Trump said. “We’ll see what happens. Either we have a deal, or we’re going to do some things that are a little bit nasty, but hopefully that won’t happen.”
His comments were reinforced by Vice President , who also highlighted hopes for a diplomatic resolution, increasing speculation that a potential agreement could eventually stabilize energy flows through the Middle East.
However, traders and analysts remain skeptical that peace is imminent. Many experts argue that the oil market may be underestimating the seriousness of ongoing supply disruptions linked to instability in the Gulf region.
Financial analysts at warned earlier this week that Brent crude prices could climb to as high as $120 per barrel in the near future if disruptions continue. Energy consultancy offered an even more dramatic outlook, suggesting prices could approach $200 per barrel if the strategically vital Strait of Hormuz remains heavily restricted through the end of the year.
The Strait of Hormuz, one of the world’s most critical oil transit chokepoints, remains a major concern for global markets. Although several oil tankers have resumed movement through the waterway, shipping traffic remains far below normal levels.
On Wednesday, three supertankers carrying nearly six million barrels of Middle Eastern crude reportedly crossed the strait after waiting in Gulf waters for more than two months. Even so, maritime traffic remains dramatically reduced compared to pre-conflict levels, when approximately 130 vessels moved through the passage daily.
The region’s instability continues to fuel concerns over long-term supply shortages. Analysts at energy consultancy PVM warned that global oil inventories could fall to dangerously low levels if disruptions persist, arguing that some investors may be showing too much complacency toward the risks posed by the ongoing conflict.
Additional pressure on energy markets comes from the slow recovery of regional export infrastructure. According to Sultan Al Jaber, chief executive of the , it may take at least four months for oil shipments to return to 80% of their pre-conflict levels.
Meanwhile, global governments and energy firms are increasingly relying on commercial stockpiles and strategic petroleum reserves to offset supply shortages and maintain market stability.
Fresh data from the U.S. Energy Information Administration also highlighted strong fuel demand in the United States. American crude oil inventories reportedly fell by 7.9 million barrels last week to approximately 445 million barrels—far exceeding analysts’ expectations of a 2.9 million-barrel decline. Gasoline inventories also decreased, signaling sustained energy consumption despite high fuel costs, while distillate stocks, including diesel and heating oil, rose modestly.
In another notable development, Russian Deputy Prime Minister said some countries had begun easing sanctions on Russian oil exports, arguing that global markets could not function efficiently without access to Russian energy supplies.
Although Wednesday’s price drop reflected renewed optimism surrounding diplomacy, many traders remain cautious. The fate of oil markets may now depend heavily on whether Washington and Tehran can secure a deal—or whether renewed military threats further destabilize an already fragile energy system.
For now, investors are balancing hopes of peace against the reality that even a small disruption in Middle Eastern oil production can send shockwaves through the global economy.
Source Reuters
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