Oil prices edged lower on Wednesday after US President Donald Trump said the conflict with Iran could come to an end “very quickly.” However, investors stayed cautious as uncertainty over diplomatic talks and concerns about disruptions to Middle East oil supplies continued to weigh on the market.
Brent crude futures declined by 45 cents, or 0.4%, to $110.83 per barrel, while US West Texas Intermediate crude dropped 27 cents, or 0.3%, to $103.88 a barrel.
Both benchmarks had already fallen nearly $1 on Tuesday after US Vice President JD Vance indicated that Washington and Tehran were making progress in negotiations and suggested that neither side was interested in renewed military escalation, according to Reuters. Analysts noted that markets were closely monitoring whether the two countries could successfully secure a peace agreement amid fluctuating signals from the White House.
“Investors are closely watching whether the US and Iran can bridge differences and reach a peace agreement, especially as Washington’s stance appears to change frequently,” said Toshitaka Tazawa of Fujitomi Securities.
Tazawa added that oil prices could continue to stay high due to concerns over possible renewed military strikes and extended disruptions in crude supply.
“Prices are likely to remain elevated because of the risk of further US action against Iran and expectations that oil supply may not return to pre-conflict levels anytime soon, even if a deal is reached,” he said.
Although Trump recently expressed confidence that the conflict could be resolved quickly, he had earlier warned that the United States could launch fresh strikes against Iran if negotiations collapse.
On Tuesday, Trump said Iranian leaders were “begging for a deal” and cautioned that additional US military action could occur within days if talks failed.
The conflict has also significantly impacted the Strait of Hormuz, a key shipping passage responsible for transporting nearly one-fifth of global oil supplies, according to the International Energy Agency.
Meanwhile, Citigroup projected that Brent crude could climb to $120 per barrel in the near term, warning that markets may be underestimating the threat of prolonged supply disruptions.
Supply concerns were also reflected in shrinking US crude inventories. Market sources citing American Petroleum Institute data said US crude stockpiles declined for a fifth straight week last week, while fuel inventories also registered a drop.
