Oil markets pulled back in early trading after reports that Tehran could allow ships to pass on the Omani side of the Strait of Hormuz pushed hopes of a reduction in U.S.-Iran tensions ahead of renewed talks.
At 0021 GMT, Brent crude futures fell 44 cents, or 0.5%, to $94.49 a barrel. U.S. West Texas Intermediate futures were down 70 cents, or 0.8%, at $90.59 a barrel. Both benchmarks had ended Wednesday with little change.
The White House signalled cautious optimism about the possibility of reaching a deal to end hostilities, while also warning that economic pressure on Tehran would increase if it remained uncooperative. A source briefed by Tehran said Iran could consider permitting vessels to sail freely through the Omani side of the Strait of Hormuz if an agreement were reached to prevent a resumption of large-scale conflict.
"While there are hopes for de-escalation, many investors remain sceptical, given that U.S.-Iran talks have repeatedly broken down even after appearing to make progress," said Toshitaka Tazawa, an analyst at Fujitomi Securities. "Until a peace deal is reached and free navigation through the strait is restored, WTI prices are expected to continue fluctuating between $80 and $100," he added.
Market participants remain mindful that the U.S.-Israeli war with Iran has resulted in the largest-ever disruption of global oil and gas supplies, after Iran interrupted traffic through the Strait of Hormuz. The waterway handles roughly 20% of the world's oil and liquefied natural gas flows, amplifying the stakes for energy and shipping markets.
Diplomatic efforts continued alongside market movements. U.S. and Iranian officials were reported to be considering a return to Pakistan for further discussions as early as the coming weekend, after the most recent talks ended on Sunday without a breakthrough. Pakistan's army chief, acting as mediator, arrived in Tehran on Wednesday with the stated aim of preventing a renewal of hostilities.
At the same time, U.S. military action has included a blockade of shipping leaving Iranian ports, which U.S. forces say has effectively halted maritime trade to and from the country. Policy decisions in Washington also tightened the market backdrop: U.S. Treasury Secretary Scott Bessent announced that Washington will not renew waivers that had allowed the purchase of certain Iranian and Russian oil without triggering U.S. sanctions.
Compounding the geopolitical influences, official U.S. inventory data showed a decline in onshore crude stocks. The U.S. Energy Information Administration reported that crude inventories fell by 913,000 barrels to 463.8 million barrels in the week ended April 10. That result contrasted with analysts polled for a Reuters survey, who had expected a rise of 154,000 barrels.
With diplomatic signals offering a possible path to reduced tension but supply disruptions and sanctions-related measures still in place, oil prices are likely to remain sensitive to both negotiation developments and physical-market indicators such as inventory levels and shipping flows through the Strait of Hormuz.
Summary
Early trading saw declines in Brent and WTI after reports that Iran might allow ships to use the Omani side of the Strait of Hormuz if a deal prevents renewed conflict. Gains from that prospect were tempered by ongoing supply disruptions, a U.S. shipping blockade of Iranian ports, a decision not to renew certain oil waivers, and a larger-than-expected fall in U.S. crude inventories.