Global oil markets retreated on Wednesday as renewed diplomatic signals from the U.S. raised expectations of a possible ceasefire in the Middle East, triggering a wave of profit-taking after days of conflict-driven gains.
Brent crude fell 4 per cent to $100.32 per barrel, after dipping as low as $97.57 in intraday trading, while U.S. West Texas Intermediate (WTI) declined 3.4 per cent to $89.24, reversing much of the nearly 5 per cent rally recorded in the previous session.
The pullback comes amid reports that the United States has presented a 15-point proposal to Iran aimed at ending the ongoing conflict.
At the centre of the market’s recalibration is growing optimism, albeit cautious,that negotiations could lead to a temporary cessation of hostilities.
President Donald Trump indicated that progress was being made in talks with Iran, while reports indicate the proposal includes provisions for a month-long ceasefire, the reopening of the Strait of Hormuz, and commitments around nuclear de-escalation.
Analysts say the mere prospect of easing tensions was sufficient to trigger a technical correction in oil markets that had priced in sustained disruption risk.
“Expectations of a ceasefire have risen slightly and profit-taking is leading the market. But the outlook remains uncertain as to whether negotiations will succeed, limiting selling,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment.
Despite the price retreat, underlying market fundamentals remain tight.
The conflict has effectively halted shipments through the Strait of Hormuz, a critical artery for global energy flows that typically accounts for roughly one-fifth of worldwide crude oil and liquefied natural gas transport.
The scale of disruption has been described by the International Energy Agency as the largest oil supply shock on record, underscoring the fragility of global energy markets.
Even with diplomatic overtures on the table, analysts caution that supply constraints are unlikely to ease immediately.
“The market outlook remains tight notwithstanding the prospects of a war off-ramp. Even if flows resume, it’s not clear that all shut-in production will return until there is confidence in a durable ceasefire,” said Saul Kavonic, head of energy research at MST Marquee.
Market participants remain wary of mixed signals from the geopolitical front.
While diplomatic efforts appear to be gaining traction, military activity continues, with ongoing strikes involving Israel, Iran, and U.S.-aligned forces. Reports also indicate that Washington is preparing to deploy additional troops to the region, further complicating the outlook.
Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that developments in the Middle East will remain the “dominant price driver” in the near term, with oil prices likely to trade within a wide and volatile range.
