Oil prices fell sharply on Wednesday, erasing their earlier gains amid continued uncertainty about the conflict in the Middle East, despite signals of a possible imminent cessation of the war between the United States, Israel and Iran. Brent crude futures for June delivery fell 3.2% to $100.64 a barrel, while U.S. light crude oil WTI for May delivery lost 3.3% to $98.04.
The decline comes after an initial rise in prices, as investors began to take profits due to mixed signals about the conflict. Analysts said the market was reacting to expectations that the fighting could end in the coming weeks, after US President Donald Trump said the military campaign could be ended within two to three weeks.
However, experts warn that even with a de-escalation, supplies will remain limited due to damage to infrastructure and disrupted logistics chains. Restoring tanker traffic and normalizing insurance costs will take time, which will continue to maintain the risk of shortages in the market.
Additional tension is also created by the fact that the key Strait of Hormuz remains closed, with about 20% of global oil and liquefied natural gas trade passing through it. Analysts say the combination of limited diplomatic progress, naval attacks and threats to energy infrastructure continue to keep supply risks high.
Opec data showed oil production fell by 7.3 million barrels per day in March from the previous month, reflecting the impact of export restrictions imposed by the blockade of the strait. At the same time, U.S. production also saw its biggest drop in two years in January, following a severe winter storm, further complicating the situation in global energy markets.