Oil Prices Rebound as Iran Talks Continue and Supply Concerns Deepen

Oil prices rose more than 1 percent on Thursday, recovering part of the sharp losses recorded a day earlier as investors weighed ongoing peace negotiations between the United States and Iran against tightening global supply conditions and falling US crude inventories.

Brent crude futures climbed $1.27, or 1.21 percent, to $106.29 a barrel by 09:18 a.m. Saudi time. US West Texas Intermediate crude also gained $1.29, or 1.31 percent, reaching $99.55 a barrel.

The rebound followed a steep decline on Wednesday, when both benchmarks dropped more than 5.6 percent to their lowest levels in over a week. Markets reacted after US President Donald Trump said negotiations with Iran were approaching a final stage, while also warning that further military action remained possible if Tehran failed to agree to a peace settlement.

Analysts said oil traders remain highly sensitive to developments linked to Iran and the wider Middle East conflict.

“The oil market remains overly sensitive to Iran-related headlines, with participants continuing to pin considerable hope on reports that talks between the US and Iran are progressing,” analysts at ING said in a research note.

The bank cautioned that similar optimism in previous negotiations had often ended without a breakthrough. ING forecast average Brent crude prices at around $104 a barrel during the current quarter.

Despite ongoing diplomatic efforts, tensions in the region remain elevated. Iran warned against any further attacks and announced measures aimed at tightening its control over the Strait of Hormuz, a critical global shipping route that normally handles around 20 percent of the world’s oil and liquefied natural gas supplies.

Iran on Wednesday introduced what it called a “Persian Gulf Strait Authority,” declaring that the waterway would now operate as a “controlled maritime zone.”

Tehran effectively shut the strait following US and Israeli attacks that triggered the conflict on February 28. Although major fighting has largely subsided since an April ceasefire, shipping activity through Hormuz remains heavily restricted, while the US continues its blockade along Iran’s coastline.

The disruption has intensified concerns over global energy supplies, forcing countries to draw heavily from commercial stockpiles and emergency reserves.

The US Energy Information Administration reported on Wednesday that the United States withdrew nearly 10 million barrels from its Strategic Petroleum Reserve last week, marking the largest drawdown in the reserve’s history.

Fresh inventory data also showed a larger-than-expected decline in US crude stockpiles, reinforcing fears that supply shortages could persist.

“The drawdown in oil inventories will make it difficult for oil prices to remain low,” said Mingyu Gao, chief researcher for energy and chemicals at China Futures.

He added that continued restrictions around the Strait of Hormuz could push global refined fuel and crude inventories below seasonal averages seen during the past five years by late May and June.