Global oil markets retreated on Wednesday, with prices falling about 3 percent after earlier posting steeper losses, as investors reacted to signs that Iran is reviewing a U.S.-backed proposal to end the ongoing conflict in the Persian Gulf.
Brent crude futures declined by $3.13, or 3.0 per cent, to $101.36 per barrel, while U.S. West Texas Intermediate (WTI) crude fell $2.28, or 2.5 per cent, to $90.07 per barrel. Earlier in the trading session, Brent had plunged by as much as 7 per cent, underscoring heightened market sensitivity to geopolitical developments.
The price movements come as Tehran signals it has not outright rejected a U.S. proposal aimed at ending the war that has severely disrupted global energy flows. According to a senior Iranian official, the government is still reviewing the plan despite an initially negative response, suggesting that diplomatic channels remain partially open.
The proposal, reportedly delivered through Pakistan, outlines a 15-point framework for de-escalation. While Iranian officials have publicly dismissed the prospect of negotiations with U.S. President Donald Trump’s administration, delays in issuing a formal response have been interpreted by analysts as a sign that some factions within Tehran may be weighing the economic and strategic implications of continued conflict.
Energy analysts warn that uncertainty surrounding the talks will continue to drive volatility in global oil markets. “Until greater clarity emerges regarding progress in negotiations, the oil market will remain vulnerable to another price spike,” analysts at Ritterbusch and Associates said in a note.
Recent weeks have seen extreme price swings, pushing Brent crude’s 30-day historical volatility to its highest level since April 2022, while WTI volatility has climbed to levels not seen since June 2020. The turbulence reflects deepening concerns over supply disruptions and geopolitical risk.
The Strait of Hormuz, a major global energy chokepoint responsible for nearly 20 per cent of crude oil and LNG flows, has seen shipments largely halted due to the ongoing conflict, an event the International Energy Agency (IEA) describes as the largest oil supply disruption in history.
Estimates indicate that around 20 million barrels of crude supply are being lost daily, amounting to about 500 million barrels (equivalent to five days of global consumption), since the conflict began on February 28. The scale of the disruption has triggered urgent responses from both producers and consuming nations.
Saudi Arabia has moved to cushion the impact by ramping up exports via its Red Sea Yanbu port, where shipments rose to nearly 4 million barrels per day last week. Meanwhile, India has resumed imports of Iranian liquefied petroleum gas following a temporary easing of U.S. sanctions, highlighting shifting trade flows amid the crisis.
In Asia, Japan is pushing for coordinated global action. Prime Minister Sanae Takaichi has called on the IEA to organise an additional release of emergency oil stockpiles in a bid to shield consumers from rising energy costs. However, the United States has yet to draw from its Strategic Petroleum Reserve, according to the latest data from the U.S. Energy Information Administration (EIA).
Instead, U.S. crude inventories rose sharply, with stockpiles increasing by 6.9 million barrels in the week ended March 20, far exceeding analysts’ expectations of a 500,000-barrel build. The unexpected inventory surge has provided some temporary relief to supply concerns, contributing to downward pressure on prices.
Compounding the global supply outlook, fresh disruptions have emerged in Europe. Russia’s key Baltic export terminals at Primorsk and Ust-Luga suspended operations following Ukrainian drone attacks that sparked fires and forced loading halts. Market estimates indicate that up to 40 per cent of Russia’s oil export capacity has been impacted by a combination of attacks, infrastructure damage, and tanker seizures.
The geopolitical fallout is also reverberating through broader economic indicators. Germany’s business morale declined sharply in March, reflecting rising pessimism among firms as the energy crisis threatens to derail recovery in Europe’s largest economy. Policymakers across the European Union are now exploring structural reforms, including adjustments to carbon market mechanisms, to mitigate future energy price volatility.
