Oil prices retreated on Wednesday following a notable 4% spike the previous day, when US airstrikes on Iran intensified fears of a breakdown in the ongoing Doha negotiations between the two nations aimed at ending the war and reopening the Strait of Hormuz.
Brent crude futures reportedly fell by $1.52 (1.53%) to settle at $98.06 a barrel, while US West Texas Intermediate (WTI) crude dropped by $1.90 (2.02%) to trade at $91.99 a barrel.
The drop comes after Brent prices surged by approximately 4% on Tuesday, when the US military launched airstrikes on southern Iran, targeting what it claimed were boats “trying to plant mines and missile launch pads.”
Washington designated the strikes as “self-defense” in a US Central Command statement, claiming they shielded American troops from Iranian threats, while CENTCOM spokesperson Tim Hawkins added that US forces would continue to exercise restraint during the ceasefire.
However, Iran’s Islamic Revolutionary Guard Corps (IRGC) said Tuesday it had downed a US MQ-9 drone and repelled an F-35 fighter jet and another drone that had entered Iranian airspace over the Persian Gulf, reaffirming Tehran’s right to counter US ceasefire violations.
Following the ceasefire declared last April, Washington and Tehran had signaled progress in talks to reopen the Strait of Hormuz. Despite the recent escalation in hostilities, some liquefied natural gas (LNG) tankers have passed through the strait over the past few days, raising expectations that it could soon be reopened.
In the negotiations, Tehran is seeking the release of approximately $24 billion in frozen assets, demanding that half be made immediately available upon the signing of an initial memorandum of understanding, according to Iran’s semi-official Tasnim News Agency.
A high-level Iranian delegation led by Parliament Speaker Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi arrived in Doha on Monday for discussions with Qatari officials on a potential agreement with the United States to end the war.
Meanwhile, President Donald Trump said negotiations with Tehran were “proceeding nicely!” but warned that a failure to reach a deal would mean going “Back to the Battlefront and shooting, but bigger and stronger than ever before.”
Iran had imposed a near-total ban on navigation and vessel transit through the vital strait in response to the US-Israeli attack in late February. This was temporarily halted by April’s fragile ceasefire agreement, with hopes this would lead to a “permanent peace agreement.”
Iran’s tightening grip on the waterway disrupted global markets and drove global oil prices up to as high as $120 a barrel, up from where they had been hovering around $67.
This blockade has granted Tehran significant leverage to compel Washington to accept its conditions for halting the war on all fronts and lifting the sanctions imposed on Iran.
Concurrently, the United States is enforcing a naval blockade on both Iranian ports and the strait to pressure Tehran into agreeing to open the strait, halting uranium enrichment, and curbing its missile program.
