Oil drops on ceasefire hopes in Middle East

Oil prices dropped by about 4% on Wednesday as expectations of a possible ceasefire between the United States and Iran raised hopes of easing supply disruptions in the Middle East.

Brent crude futures declined $4.89, or 4.7%, to $99.60 a barrel, after earlier falling to $97.57. U.S. West Texas Intermediate crude slipped $3.54, or 3.8%, to $88.81 a barrel, having touched a low of $86.72. The pullback followed a nearly 5% surge in both benchmarks on Tuesday, with gains trimmed in volatile trading afterward.

Analysts said rising expectations of a ceasefire, along with profit-taking, were weighing on prices. However, uncertainty over whether negotiations will succeed continues to limit the extent of the decline.

U.S. President Donald Trump said progress was being made toward ending the conflict, and reports indicated Washington had sent Tehran a 15-point proposal. Israeli media suggested the plan includes a month-long ceasefire to allow negotiations on key issues such as Iran’s nuclear program, support for proxy groups, and reopening the Strait of Hormuz.

Despite these developments, market participants remain cautious, with some analysts warning that prices are likely to stay volatile as the situation evolves. The conflict has significantly disrupted energy flows, with shipments of oil and liquefied natural gas through the Strait of Hormuz — a critical route for roughly one-fifth of global supply — largely halted.

Even if a ceasefire is reached and shipments resume, analysts say it may take time for production and exports to fully recover, depending on how stable any agreement proves to be.

Diplomatic efforts appear to be expanding, with Pakistan offering to host talks between the U.S. and Iran. Iran has also indicated that non-hostile vessels may pass through the Strait of Hormuz if they coordinate with its authorities.

Meanwhile, military activity in the region continues, and reports suggest the U.S. may deploy additional troops, adding to ongoing uncertainty.

To help offset disruptions, Saudi Arabia has increased exports from its Red Sea port of Yanbu to nearly 4 million barrels per day, a sharp rise from pre-conflict levels.

In the United States, inventory data added further pressure to prices. Industry figures showed increases in crude, gasoline, and distillate stocks last week, signaling softer demand or rising supply in the world’s largest oil consumer.