WTI crude futures experienced a decline, falling over 1% below $64 a barrel. This downturn reverses a two-day period of gains that was previously fueled by escalating Middle East tensions. The shift is attributed to news of upcoming talks between Tehran and Washington, which have alleviated concerns about potential disruptions to oil supplies stemming from a wider conflict.
- WTI crude futures fell more than 1% below $64 a barrel.
- Tehran confirmed it would hold talks with Washington this week in Oman.
- The talks ease concerns that a broader conflict could disrupt oil flows.
- Uncertainty remains over the scope of the negotiations.
- Washington wants to broaden the agenda to include Iran’s ballistic-missile program, support for regional militant groups and human rights issues.
- Oil had rallied over the previous two sessions as rising Middle East tensions lifted the geopolitical risk premium.
The market’s reaction suggests that the prospect of diplomatic engagement is perceived as a de-escalation of geopolitical risks, which had previously supported higher prices. The fact that discussions are happening caused prices to decrease and concerns that future conflict may cause a problem with oil flow have decreased. However, the differences in the desired scope of negotiations between the US and Iran introduce a degree of uncertainty, and the future price of the asset will depend on if those differences can be resolved.