Oil prices dropped on Wednesday after Oman’s foreign minister announced that Iran and the United States will hold fresh nuclear talks later this week, easing earlier fears of a possible conflict in the Middle East.
Prices had risen earlier in the day following a CNN report that said U.S. intelligence believes Israel may be preparing a strike on Iran’s nuclear sites.
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The report, based on unnamed U.S. officials, said it was unclear if Israeli leaders had made a final decision.
Brent crude closed down 47 cents, or 0.7%, at $64.91 per barrel. U.S. West Texas Intermediate crude also fell 46 cents, or 0.7%, to $61.57.
Iran is the third-largest oil producer in OPEC. Any military action involving the country could affect global oil supply. But news of the planned talks between Tehran and Washington lowered market tension and pulled prices down.
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Some analysts said the shift to diplomacy reduced the risk premium that had briefly supported prices. However, concerns remain that Iran could respond to any military threat by blocking oil shipments through the Strait of Hormuz. This key waterway handles crude exports from Saudi Arabia, Iraq, Kuwait, and the United Arab Emirates.
Analysts estimate that a short-term disruption could remove about 500,000 barrels per day from the market. Still, OPEC+ is expected to cover such a shortfall if needed.
Adding further pressure, U.S. government data showed unexpected increases in oil stockpiles. The Energy Information Administration said crude inventories rose by 1.3 million barrels last week. Gasoline stocks increased by 800,000 barrels, while distillates were up by 600,000 barrels.
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The buildup in U.S. supply came as demand shows signs of slowing, weighing further on prices.
Meanwhile, Kazakhstan increased its oil production by 2% in May, according to an industry source. This rise goes against OPEC+ efforts to limit output and balance global supply.
The oil market remains sensitive to developments in the Middle East and broader supply trends. Traders are watching the upcoming Iran-U.S. talks closely, as the outcome could shape prices in the weeks ahead.
