Oil Slides Nearly 3% as U.S.-Iran Talks Ease Supply Fears

Oil prices settled sharply lower on Thursday after the United States and Iran agreed to hold talks in Oman on Friday, easing market concerns over potential disruptions to Iranian crude supplies and injecting fresh volatility into energy markets.

Brent crude futures closed down $1.91, or 2.75%, at $67.55 per barrel, while U.S. West Texas Intermediate (WTI) crude fell $1.85, or 2.84%, to settle at $63.29 per barrel, following a choppy trading session.

The planned discussions come as the U.S. continues to bolster its military presence in the Middle East, even as regional powers seek to avoid a direct confrontation that could spiral into a broader conflict.

“Differing expectations around the scope and objectives of the talks are sustaining uncertainty, injecting volatility into crude prices as traders reassess the likelihood of escalation versus diplomacy,” analysts at Aegis Hedging said in a note.

The talks are closely watched given the strategic importance of the Strait of Hormuz, which lies between Oman and Iran and handles around 20% of global oil consumption. Major OPEC producers — including Saudi Arabia, the United Arab Emirates, Kuwait, Iraq and Iran — ship most of their crude through the narrow waterway, making any geopolitical shift in the region highly sensitive for oil markets.

This heightened uncertainty has already driven investors to aggressively hedge price risk. Trading volumes in WTI Midland contracts at Houston hit record levels in January, as market participants sought protection against Middle East supply threats and the prospect of additional Venezuelan barrels entering the U.S. Gulf Coast.

Broader commodity sentiment was also weighed down on Thursday by a stronger U.S. dollar and sharp volatility in precious metals, which dampened risk appetite across markets, analysts said.

On the supply front, pressure is also building in global crude flows. Discounts on Russian oil exports to China widened to fresh record levels this week, as sellers slashed prices to stimulate demand from the world’s largest crude importer and compensate for the expected loss of Indian purchases.

That shift follows the announcement of a new trade deal between the U.S. and India, under which New Delhi agreed to halt imports of Russian crude.

Meanwhile, analysts told Reuters that Argentina’s energy trade surplus could climb further in 2026, rising to between $8.5 billion and $10 billion, supported by growing crude output from the country’s Vaca Muerta shale formation after last year’s record surplus.