Oil prices extended declines in Asian trading on Wednesday after market participants reacted to increasing signs of diplomatic engagement aimed at limiting further escalation in the Middle East. Traders cited renewed hopes that expanded peace talks between the United States and Iran could reduce the risk of sustained supply disruptions.
By 20:48 ET (00:48 GMT) Brent futures were down 0.4% at $94.40 a barrel, while West Texas Intermediate futures fell 0.6% to $87.86 a barrel.
U.S. President Donald Trump told the New York Post on Tuesday that additional U.S.-Iran peace talks could take place within the next two days in Pakistan's capital. That prospect emerged even as Washington's naval blockade of Iran approached a third consecutive day, a measure that has been expected to exacerbate interruptions to oil flows in and around the Strait of Hormuz.
Market participants noted that the blockade is narrowly targeted at Iranian ports and vessels. Nonetheless, the possibility of spillover effects in the region has been a focal point for traders because the Strait of Hormuz remains critical to seaborne crude shipments.
Despite continued naval pressure, a fragile ceasefire between the U.S. and Iran appeared to hold, with no reports of new strikes since late last week. Sources indicated that Washington was seeking to arrange further talks before the current ceasefire expires next week.
Diplomatic movement beyond the U.S.-Iran track also supported hopes for de-escalation. Israel and Lebanon were reported to be conducting direct negotiations in Washington, and Lebanon's inclusion in any ceasefire arrangement had been identified by Iran as a key condition.
Oil markets had seen extraordinary gains in March as the Iran-related conflict disrupted supplies. ANZ analysts estimated that the fighting had removed at least 10 million barrels per day of oil from the market. The bank's analysts added that oil prices did not require a "worst-case escalation" to move higher.
"Tight balances alone are sufficient to sustain the price of Brent near or above recent threshold levels. The longer the conflict drags on, the more persistent these price dynamics are likely to be," ANZ analysts said in a note.
The Strait of Hormuz remains a central point of concern. Tehran has effectively blocked the channel in response to U.S.-Israeli hostilities in late-February, and that waterway accounts for around 20% of global oil consumption. Several economies in the Asia-Pacific region rely heavily on flows through Hormuz, which keeps regional demand sensitivity high.
For now, market direction appears linked to developments at the diplomatic table as much as to naval activity. Should talks continue and the ceasefire hold, some immediate pressure on prices has eased. Still, analysts and traders continue to monitor ship movements and political signals closely because the underlying supply constraints highlighted by recent disruptions remain in place.