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Global oil prices extended their decline on Wednesday after US President Donald Trump indicated that a possible agreement with Iran could help ease tensions in West Asia and restore disrupted oil supplies.

The prospect of a diplomatic breakthrough raised hopes that stranded shipments and blocked trade flows through the Strait of Hormuz may gradually resume, cooling some of the pressure that has pushed crude prices sharply higher in recent weeks.

Oil Prices Extend Losses

Brent crude futures fell $1.89, or 1.7 per cent, to $107.98 a barrel after tumbling 4 per cent in the previous session, reported Reuters.

US West Texas Intermediate (WTI) crude also declined, slipping $1.83, or 1.8 per cent, to $100.44 per barrel, around 9 AM today, after a 3.9 per cent fall a day earlier. 

What Triggered the Sell-Off?

The latest decline came after Trump unexpectedly announced a temporary pause in a US operation aimed at escorting ships through the Strait of Hormuz.

The US President said there had been progress towards a broader agreement with Iran, although he did not share specific details about the proposed deal. There was no immediate response from Tehran.

At the same time, Trump clarified that the US naval blockade of Iranian ports would remain in place while discussions continue.

Why the Strait of Hormuz Matters

The Strait of Hormuz remains one of the world’s most critical energy chokepoints, handling a significant share of global oil shipments.

Disruptions in the region have already tightened global supplies, sending crude prices to their highest levels since March 2022.

The closure and security concerns around the route have also led to supply shortages and inventory drawdowns as refineries scramble to manage reduced oil flows.

Markets Hope for De-Escalation

Analysts said the possibility of easing tensions has increased expectations that trapped vessels inside the Gulf could eventually resume movement.

Even if an agreement is reached, analysts believe it could take time for trade routes and supply chains to fully normalise.

US-Iran Tensions Still Far From Over

Despite the softer tone, tensions in the region remain intense. Trump said the blockade would remain “in full force and effect” while negotiations continue.

His comments came shortly after US Secretary of State Marco Rubio briefed reporters on efforts to escort stranded tankers through the Strait of Hormuz. Earlier this week, the US military also said it had destroyed several Iranian small boats, cruise missiles and drones while guiding vessels through the Gulf.

Inventory Levels Add to Market Anxiety

Meanwhile, falling US crude inventories continue to underline tight supply conditions.

According to market sources citing American Petroleum Institute data, US crude oil inventories declined by 8.1 million barrels in the week ended May 1. Gasoline inventories dropped by 6.1 million barrels, while distillate stocks fell by 4.6 million barrels over the same period.

The continued drawdown in inventories suggests that energy markets remain under pressure despite hopes of a diplomatic resolution.

While the latest comments from Trump have eased some immediate fears, uncertainty over the conflict and the future of shipping through the Strait of Hormuz continues to keep global energy markets on edge.