Crude Oil Prices Fall After Wednesday’s Sharp Rally Amid US-Iran Diplomatic Efforts

Oil markets retreated Thursday morning following a significant 4% surge the previous day as traders weigh ongoing diplomatic talks between the United States and Iran. Despite continued military positioning by both nations, analysts believe the likelihood of full-scale conflict remains low.

Crude oil markets pulled back during early Thursday trading in Asia after Wednesday’s dramatic 4% rally, as market participants evaluated diplomatic developments between Washington and Tehran while both countries continue military maneuvers in the strategically important oil-producing region.

Brent crude dropped 12 cents to $70.23 per barrel, representing a 0.2% decline by 0110 GMT, while West Texas Intermediate crude decreased 8 cents to $65.11 per barrel, down 0.1%.

Wednesday’s trading session saw both oil benchmarks close over 4% higher, marking their strongest finishes since January 30th as market participants factored in possible supply interruptions due to escalating US-Iran tensions.

“Tensions between Washington and Tehran remain high, but the prevailing view is that full-scale armed conflict is unlikely, prompting a wait-and-see approach,” said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities.

Kikukawa further explained, “U.S. President Donald Trump does not want a sharp rise in crude prices, and even if military action occurs, it would likely be limited to short-term air strikes.”

The White House reported Wednesday that modest advancement occurred during Iranian negotiations in Geneva this week, though significant gaps persist on certain matters. Officials indicated Tehran is anticipated to provide additional details within the coming weeks.

According to the Federal Aviation Administration’s website, Iran has issued a notice to airmen announcing planned rocket launches across its southern territories on Thursday between 0330 GMT and 1330 GMT.

Simultaneously, American naval vessels have been positioned near Iranian waters, with Vice President JD Vance stating that the administration is evaluating whether to maintain diplomatic discussions with Tehran or consider “another option.”

Intelligence experts report that satellite imagery reveals Iran has recently constructed a concrete barrier over a new installation at a sensitive military location, subsequently covering it with earth. This development advances construction at a site that Israel reportedly targeted in 2024.

In related developments, two days of peace negotiations in Geneva between Ukrainian and Russian representatives concluded Wednesday without significant progress, with Ukrainian President Volodymyr Zelenskiy criticizing Moscow for hindering US-facilitated attempts to resolve the four-year conflict.

Market sources indicated that American crude oil, gasoline, and distillate stockpiles declined last week, referencing American Petroleum Institute data released Wednesday. This contradicted Reuters poll expectations that crude inventories would increase by 2.1 million barrels during the week ending February 13.

The Energy Information Administration is scheduled to release official US oil inventory data on Thursday.