Oil prices fell sharply Wednesday after President Donald Trump said negotiations with Iran are in the “final stages,” raising hopes that the Strait of Hormuz could reopen and ease global supply concerns. West Texas Intermediate futures dropped more than 6% to $97.74 per barrel, while Brent crude fell nearly 6% to $104.62 per barrel.
Trump told reporters that the administration is in the final phase of talks, following his earlier decision to postpone renewed military action against Iran at the request of Gulf Arab allies. The comments contributed to renewed optimism in the market after weeks of fluctuating tension between Washington and Tehran.
The Strait of Hormuz is a critical global oil corridor, and partial or complete disruptions there have historically caused significant price swings. Iran has maintained a blockade of the strait, while the U.S. has restricted Iranian ports, creating a high-stakes stalemate affecting international oil flows.
Analysts caution that the recent price drop may reflect overly optimistic expectations. Citibank analysts warned that markets could be underestimating the potential for a prolonged disruption and project that Brent crude could reach $120 per barrel if supply issues persist.
In a more extreme scenario, Wood Mackenzie analysts suggest oil prices could approach $200 per barrel if the Strait of Hormuz remains closed for an extended period. Conversely, a swift diplomatic resolution could push prices down to around $80 per barrel by the end of 2026, they said.
For now, traders are reacting to President Trump’s remarks as a potential sign of progress. The sustainability of the oil market’s optimism will depend on developments in both the Strait of Hormuz and ongoing U.S.-Iran negotiations.