Oil Prices Extend Decline as U.S.-Iran Peace Hopes Grow
Oil prices moved lower again on Thursday after suffering a sharp selloff during the previous session, as investors continued monitoring the possibility of a peace agreement between the United States and Iran.
Markets also reacted to the latest U.S. crude inventory data while assessing the potential impact of renewed diplomacy on global oil supply flows.
Brent crude futures fell 2.7% to $98.58 per barrel, while U.S. West Texas Intermediate (WTI) crude declined 2.8% to $92.39 per barrel.
Brent and WTI Suffer Sharp Two-Day Pullback
Both oil benchmarks had already dropped more than 7% on Wednesday following reports that Washington and Tehran were moving closer toward a potential agreement that could ease geopolitical tensions in the Middle East.
Investors believe a peace deal could eventually help restore disrupted shipping activity through the Strait of Hormuz, one of the world’s most critical energy trade routes.
U.S. and Iran Continue Diplomatic Discussions
Reports suggest Iran is currently reviewing a new proposal from the United States aimed at ending the conflict that has lasted for more than two months.
President Donald Trump has continued warning that military action could resume if negotiations fail to produce an agreement.
According to reports, both countries are working through mediators on a framework designed to restart formal peace talks, with discussions expected to begin next week in Pakistan.
The negotiations are expected to focus on Iran’s nuclear program, sanctions relief, uranium enrichment limits, and international inspections.
Trump stated on Wednesday that recent talks with Tehran had gone “very good” over the previous 24 hours and suggested the United States had effectively “won” the conflict.
Earlier in the day, Trump also said military operations against Iran could end if Tehran accepts the proposed terms, although he warned that attacks could intensify if no agreement is reached.
Iran Sends Mixed Signals on Peace Proposal
Iranian officials have delivered conflicting messages regarding the latest U.S. proposal.
The country’s foreign minister reportedly confirmed that Tehran is reviewing the framework and plans to communicate its response through Pakistani mediators.
However, other reports cited Iranian officials criticizing the proposal and describing it as largely favorable to American interests.
According to CNN, Iran is expected to provide mediators with an official response by Thursday.
Strait of Hormuz Remains Key Market Focus
Financial markets remain highly sensitive to developments surrounding the Strait of Hormuz, the strategic shipping route responsible for transporting roughly 20% of global oil supplies.
Analysts at ING noted that a successful agreement restoring normal traffic through the strait would likely reduce the geopolitical risk premium currently embedded in oil prices.
However, the firm also warned that any delays or setbacks in negotiations could quickly trigger another sharp rally in oil and natural gas prices.
Earlier this week, the United States temporarily paused efforts to restore commercial shipping through the Strait of Hormuz after Iran responded militarily.
Trump later stated that the strait would reopen fully if a peace agreement is finalized, although uncertainty surrounding shipping access remains elevated as both sides continue maintaining blockades in the region.
U.S. Military Activity Continues Near Gulf Shipping Routes
According to U.S. Central Command, American forces moved to stop an Iranian-flagged oil tanker that was allegedly attempting to breach a U.S. blockade near Iranian ports.
The military said several warning rounds were fired toward the ship’s rudder as it moved toward a port in the Gulf of Oman.
U.S. Crude Inventories Continue Falling
Meanwhile, fresh data from the Energy Information Administration showed that U.S. crude oil inventories declined again last week.
Commercial crude stockpiles fell by 2.3 million barrels to 457.2 million barrels during the week ending May 1.
Although inventories continued declining, the drop was smaller than analyst expectations for a 3.4 million barrel drawdown.
Gasoline inventories also fell by 2.5 million barrels, while distillate stockpiles, including diesel and heating oil, decreased by 1.3 million barrels.
The report additionally highlighted strong U.S. petroleum exports, reflecting continued international demand for American energy supplies amid ongoing Middle East disruptions.
