Oil prices dropped by more than $1 a barrel on Thursday after the United States and Iran agreed to hold talks in Oman, easing concerns that tensions could escalate into a conflict disrupting Middle East oil supplies.
Brent crude fell $1.31, or 1.9%, to $68.15 per barrel, while U.S. West Texas Intermediate (WTI) declined $1.24, or 1.9%, to $63.90 in early trading.
The decline followed a sharp rally a day earlier, when oil prices jumped nearly 3% on reports that the talks risked collapsing. Officials later confirmed the discussions would proceed, although the scope of negotiations remains unclear.
“The market has pared back some of the geopolitical risk premium after confirmation of U.S.–Iran talks,” said Mukesh Sahdev, CEO of energy consultancy XAnalysts, warning that unresolved differences could quickly bring volatility back.
Iran has signalled openness to discussing its nuclear programme, while Washington wants broader talks covering Iran’s missile activities, regional influence and domestic policies. Analysts say the gap between both sides keeps the risk of renewed tensions alive.
Concerns persist that U.S. President Donald Trump could still act on threats against Iran, OPEC’s fourth-largest producer, potentially destabilising oil flows across the region. Any disruption could also affect shipments from other Gulf exporters, most of whose crude passes through the Strait of Hormuz — a key route for about 20% of global oil consumption.
Oil prices also faced pressure from a stronger U.S. dollar and volatility in precious metals markets. Meanwhile, U.S. government data showed crude inventories fell last week after severe winter weather disrupted production and transport across parts of the country.