Oil Prices Drop Over 3% as Market Weighs Conflict Uncertainty and Profit-Taking

Global oil prices fell sharply on Wednesday, reversing earlier gains as investors reacted to continued uncertainty surrounding the conflict involving Iran, despite signs that the war could be nearing an end.

The front-month Brent crude contract for June declined by $3.33, or 3.2 percent, to $100.64 per barrel in morning trading. US West Texas Intermediate crude futures for May also dropped, falling $3.34, or 3.3 percent, to $98.04 per barrel.

Prices had initially moved higher earlier in the session but turned lower as traders moved to secure profits amid mixed signals about the direction of the conflict. Analysts said the market remains highly sensitive to geopolitical developments, particularly those affecting supply routes and infrastructure.

“The dip is likely due to a lull during Asian trading hours combined with profit-taking, following indications from the United States that the war may be approaching its end,” said Emril Jamil, a senior analyst at LSEG.

Oil markets had already come under pressure on Tuesday after reports suggested that Iran’s leadership may be open to ending the conflict. Donald Trump added to expectations of a potential de-escalation, telling reporters that the United States could end its military campaign within two to three weeks. He also indicated that Iran may not need to reach a formal agreement for hostilities to cease.

Despite these signals, analysts caution that any easing of tensions may not immediately translate into lower prices. Damage to energy infrastructure and disruptions to shipping routes are expected to keep supplies constrained in the near term.

“Even if the situation begins to calm, tanker flows and shipping operations will not return to normal immediately,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova. She noted that higher shipping costs, insurance premiums and potential damage to oil facilities would continue to affect supply.

The Strait of Hormuz remains a key concern for markets. The route handles around one-fifth of global oil and liquefied natural gas shipments, and its disruption has significantly impacted global energy flows. Reports suggest the US may seek to wind down military operations before the waterway is fully reopened, adding further uncertainty.

Data also points to tightening supply conditions. A Reuters survey showed that output from the OPEC fell by 7.3 million barrels per day in March compared with the previous month, reflecting reduced exports linked to the disruption.

In the United States, crude production also declined sharply earlier in the year after severe winter weather affected output, according to the Energy Information Administration.

While markets reacted to hopes of a possible end to the conflict, analysts said ongoing risks to supply mean oil prices are likely to remain volatile in the coming weeks.