Brent crude fell about 3% to a five-week low on Wednesday as diplomatic signals on a U.S.-Iran agreement eased fears of prolonged Gulf supply disruptions, pulling the benchmark to around $96.6 per barrel after a recent run driven by conflict-related supply anxiety.
The decline followed remarks by U.S. Secretary of State Marco Rubio, who said negotiations between Washington and Tehran remained active and that finalising a potential agreement could take several more days. The statement gave traders enough reason to scale back some of the risk premium built into prices over recent sessions as military activity around the Strait of Hormuz kept markets on edge.
A more concrete signal came from the waterway itself. Two non-Iranian supertankers successfully exited the strait on Tuesday, marking the first significant movement of unrestricted crude cargoes in nearly a week. That development, modest as it was, told markets that the chokepoint had not closed entirely and that some commercial shipping remained viable, giving oil traders a tangible reason to ease their worst-case assumptions.
The backdrop, however, remains deeply uncertain. U.S. forces reportedly struck targets near the strait during the same period, while Iran’s Revolutionary Guard said it had fired on several U.S. aircraft it claimed had entered Iranian airspace. Military activity on both sides has continued even as diplomatic channels stay open, leaving traders caught between two competing narratives.
The Strait of Hormuz sits at the centre of those competing signals. Roughly one-fifth of the world’s daily oil and Liquefied Natural Gas (LNG) flows pass through the waterway, making it the single most consequential chokepoint in global energy supply chains. Any sustained closure would send prices sharply higher and trigger inflation shocks across import-dependent economies.
That risk remains the dominant concern for major Asian economies, many of which rely heavily on Gulf crude exports to power their industrial and consumer sectors. The weeks of elevated prices preceding Wednesday’s decline had already rekindled debate about energy security and the vulnerability of global supply chains to a single strategic flashpoint.
Oil markets have swung sharply in recent sessions with each new development, and analysts said Wednesday’s pullback reflected a recalibration of expectations toward diplomacy rather than a conclusion that the crisis has passed. As long as military activity continues near the strait, traders are expected to remain reactive to every statement and incident that shifts the balance between conflict and negotiation.
