Oil prices moved lower for a fourth consecutive session on Thursday as investors grew increasingly hopeful that diplomatic progress in the Middle East could eventually improve regional supply flows.
Benchmark Brent crude futures fell 0.5% to $87.37 a barrel by 04:54 ET, while US West Texas Intermediate crude futures also declined 0.5% to $81.79 a barrel.
Both Brent and WTI have dropped more than 6% over the past week, with optimism surrounding a potential diplomatic agreement largely outweighing continued tensions between the US and Iran.
Washington tightened economic sanctions against Iran earlier this week and warned other countries against maintaining trade with Tehran. However, subsequent reports have pointed to the possibility of improving relations between the two sides.
Russian state media reported that the US and Iran had reached a new ceasefire agreement that could be announced in the coming days, although attention remains firmly focused on whether diplomatic progress translates into improved energy flows.
Hormuz talks offer potential support for oil supplies
Separate media reports indicated that Iran and Oman are moving closer to an agreement covering commercial shipping through the Strait of Hormuz.
Tehran cautioned that an agreement would not necessarily result in the immediate reopening of the waterway, but the talks have nevertheless raised hopes that shipping conditions could gradually normalise.
Pakistan, another important regional mediator, has also reported progress in peace negotiations involving Iran, adding to expectations that diplomatic efforts are gaining momentum.
Shipping data, however, showed that traffic through the Strait of Hormuz remains at only a fraction of pre-war levels.
Before the conflict, approximately 20% of global crude supply passed through the waterway, making its eventual reopening an important potential catalyst for global energy markets.
Any sustained recovery in shipping volumes could therefore significantly improve the availability of Middle Eastern crude and ease some of the supply constraints that have supported oil prices during the conflict.
Russia-Ukraine developments remain on the radar
Elsewhere, reports suggested that Russia could intensify its attacks on Ukraine after concluding that negotiations had made limited progress.
Moscow is reportedly considering increased ballistic missile attacks targeting Kyiv and other infrastructure, bringing renewed attention to another geopolitical risk affecting global commodity markets.
“The Russia-Ukraine conflict has been completely sidelined by markets for a while, and there was little to suggest hopes of a resolution were building up. The commodity markets continue to look only at the Middle East situation,” analysts at ING said in a note.
For now, Middle East diplomacy remains the dominant influence on oil sentiment, with markets increasingly focused on whether negotiations can restore commercial shipping through Hormuz and bring more crude supply back to international buyers.