Oil prices fell sharply on Wednesday after reports suggested the United States had put forward a 15-point proposal to Iran aimed at ending the Middle East conflict, increasing expectations that a ceasefire could help restore disrupted energy supplies in the region.
Brent crude futures dropped $4.17, or 4%, to $100.32 per barrel by 0708 GMT, after earlier touching a session low of $97.57. U.S. West Texas Intermediate crude futures declined $3.11, or 3.4%, to $89.24 per barrel, having previously fallen to $86.72.
Both benchmarks had gained nearly 5% on Tuesday before surrendering part of those advances during volatile trading after the official settlement.
“Expectations of a ceasefire have risen slightly and profit-taking is leading the market,” said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities. “But the outlook remains uncertain as to whether negotiations will succeed, limiting selling.”
U.S. President Donald Trump said on Tuesday that Washington was making headway in negotiations aimed at ending the war with Iran, while a source confirmed that a 15-point settlement proposal had been sent to Tehran.
Israel’s Channel 2 reported that the United States is pushing for a month-long ceasefire to allow discussions on the plan, which reportedly calls for dismantling Iran’s nuclear programme, ending its support for proxy groups and reopening the Strait of Hormuz.
Some analysts, however, remained cautious about the likelihood of rapid progress, warning that oil markets could continue to experience significant volatility.
Oil flows through Hormuz largely disrupted
Priyanka Sachdeva, senior market analyst at Phillip Nova, said developments in the Middle East would remain the “dominant price driver” keeping oil prices moving within a wide range in the near term.
The conflict has effectively halted shipments of oil and liquefied natural gas through the Strait, which normally carries around one-fifth of global crude and gas supplies. The disruption has been described by the International Energy Agency as the largest oil supply shock on record.
“The market outlook remains tight notwithstanding the prospects of a war off-ramp,” said Saul Kavonic, head of energy research at MST Marquee.
He added that even if shipments through the Strait restart, “it’s not clear all shut-in production will resume until there is more clarity on the durability of a ceasefire.”
Iran has informed the United Nations Security Council and the International Maritime Organization that “non-hostile vessels” may pass through the Strait of Hormuz if they coordinate with Iranian authorities, according to a note reviewed by Reuters on Tuesday.
Despite diplomatic developments, military strikes involving the United States, Israel and Iran have continued, and sources say Washington is preparing to deploy additional forces to the region.
To offset the disruption in Hormuz, oil exports from Saudi Arabia’s Red Sea port of Yanbu climbed to nearly 4 million barrels per day last week, a sharp increase compared with levels before the conflict began, according to shipping data.
In the United States, inventories of crude oil, gasoline and distillates all increased last week, according to market sources citing figures from the American Petroleum Institute released on Tuesday.
Crude stocks rose by 2.35 million barrels in the week ending March 20, while gasoline inventories increased by 528,000 barrels and distillate stocks rose by 1.39 million barrels compared with the previous week, the sources said.
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