Oil prices fell on Thursday after the United States and Iran confirmed they would hold talks in Oman on Friday, easing concerns of a potential military conflict that could disrupt crude supplies from the Middle East.
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Brent crude futures dropped $1, or 1.4%, to $68.47 per barrel by 0152 GMT, while U.S. West Texas Intermediate (WTI) crude declined 91 cents, also 1.4%, to $64.23.
The pullback followed a roughly 3% surge on Wednesday, sparked by media reports suggesting the planned talks could collapse. Later in the day, however, officials from both sides confirmed that discussions would proceed, although the agenda has yet to be finalised.
Tony Sycamore, market analyst at IG, said uncertainty surrounding the negotiations has been driving recent price volatility, noting that crude rallied on fears the talks might fail but retreated as “those fears have since moderated on reports that the nuclear talks are back on.”
Iran has indicated it is open to discussing its nuclear programme, including uranium enrichment, with Western countries. The United States, meanwhile, is seeking broader talks that would also cover Iran’s ballistic missile programme, its support for armed proxy groups across the Middle East, and its domestic human rights record.
Despite the diplomatic developments, markets remain cautious amid concerns that U.S. President Donald Trump could still follow through on threats to strike Iran. Any escalation involving Iran — the fourth-largest producer in OPEC — could trigger wider instability in the oil-rich region.
Analysts also warn that a conflict could affect exports from other Gulf producers. Around one-fifth of global oil consumption passes through the Strait of Hormuz between Oman and Iran, a vital shipping route used by Saudi Arabia, the United Arab Emirates, Kuwait, Iraq, and Iran.
While expectations of talks have reduced the recent risk premium in oil prices, the market found some support on Wednesday from U.S. inventory data. The Energy Information Administration reported declines in U.S. crude and distillate stocks for the week ended January 30, although gasoline inventories rose as a winter storm disrupted activity across large parts of the country.
