Oil prices fell sharply on Wednesday, extending losses from the previous session after reports suggested that the United States and Iran may be moving toward a ceasefire agreement.
Crude markets also came under pressure after Iran and Oman confirmed that talks had resumed over potentially reopening the Strait of Hormuz to more commercial shipping.
These developments largely overshadowed the tougher economic sanctions recently imposed on Iran by the United States.
By 22:26 ET (02:26 GMT), Brent crude futures dropped 2.6% to $86.32 per barrel, while West Texas Intermediate crude fell 2.4% to $80.36 per barrel.
U.S.-Iran Ceasefire Reports Pressure Oil Prices
Oil prices had already fallen more than 5% on Tuesday following reports from Russian media that Washington and Tehran were close to reaching a ceasefire.
Russian state-owned news agency RIA reported the potential agreement, citing Pakistani and Iranian sources.
According to the report, the proposed deal could include guarantees for free navigation through the Strait of Hormuz and may be formally announced in the coming days.
However, the report had not been independently verified at the time.
Pakistan Continues Mediation Efforts
The ceasefire speculation followed comments from Pakistani officials indicating progress in mediation efforts involving Iran.
Officials said discussions had included the possibility of restoring an interim ceasefire arrangement.
Pakistan has played an important diplomatic role during the ongoing U.S.-Iran conflict. The country also helped facilitate an earlier ceasefire agreement between the two sides in June.
Any credible progress toward a new truce could reduce concerns about prolonged disruptions to Middle Eastern oil supplies.
Iran and Oman Discuss Strait of Hormuz Access
Meanwhile, Iran confirmed that it had resumed negotiations with neighboring Oman regarding commercial shipping through the Strait of Hormuz.
The two countries discussed establishing a temporary joint navigation corridor that could allow more vessels to pass through the strategically important waterway.
The prospect of increased commercial traffic immediately weighed on crude oil prices as traders reduced some of the geopolitical risk premium that had supported the market.
Hormuz Supply Risks Begin to Ease
Before the latest talks, Iran had already permitted several Iraqi oil tankers to travel through the Strait of Hormuz.
However, overall shipping activity remains far below levels seen before the conflict.
The Strait of Hormuz is one of the world’s most important energy transit routes. Before the recent disruption, roughly 20% of global oil supplies passed through the waterway.
Restrictions on shipping therefore created significant supply concerns and contributed to the earlier surge in crude prices.
If commercial traffic continues to recover, some of those supply fears could ease further.
U.S. Sanctions Remain a Risk for Oil Markets
The renewed Iran-Oman negotiations came only a day after Washington announced stricter economic sanctions against Tehran.
The latest measures suggested that the United States may increasingly favor economic pressure rather than direct military action.
For oil traders, the market outlook now depends heavily on whether diplomatic talks lead to a lasting ceasefire and whether shipping through the Strait of Hormuz can normalize.
A sustained reduction in geopolitical tensions could continue to pressure crude prices. However, any breakdown in negotiations or renewed disruption to regional oil exports could quickly bring supply risks back into focus.
