Oil Declines Over 1% as U.S.-Iran Diplomatic Talks Ease Supply Risk Concerns

Oil prices moved lower by more than 1% on Thursday but continued to trade near recent multi-month highs after the United States and Iran agreed to hold diplomatic negotiations in Oman on Friday, easing immediate fears of supply disruptions.

Brent crude futures dropped 86 cents, or 1.2%, to $68.6 per barrel at 1036 GMT. U.S. West Texas Intermediate crude fell 82 cents, or about 1.3%, to $64.32 per barrel.

Despite the decline, Brent prices remained roughly $3 below the five-month high reached late in January, when geopolitical supply concerns helped drive prices higher.

UBS analyst Giovanni Staunovo said oil markets continue to be heavily influenced by developments in the Middle East, with traders closely monitoring the planned discussions in Oman.

The talks come as the United States expands its military footprint in the region, while regional nations attempt to avoid tensions escalating into a broader conflict.

Approximately 20% of global oil consumption flows through the Strait of Hormuz, which sits between Oman and Iran. Major OPEC producers — including Saudi Arabia, the United Arab Emirates, Kuwait and Iraq — depend on the route for most of their crude exports, alongside Iran.

PVM Oil Associates analyst John Evans suggested market pricing ahead of Friday’s meeting will likely remain influenced by expectations for a diplomatic resolution.

“However, there will be no comfort as such in prices, for one untoward remark or a breakdown in talks and the Brent price will soon be banging on the door of $70 a barrel and looking at year-to-date highs,” he said.

Heightened price swings have encouraged traders to hedge exposure to oil this year, with January seeing record trading activity in WTI Midland contracts in Houston. The surge has been driven by concerns over Middle East supply risks as well as increasing shipments of Venezuelan crude toward the U.S. Gulf Coast.

Analysts added that gains in the U.S. dollar and ongoing volatility across precious metals markets also weighed on commodities and broader risk appetite during Thursday’s session.