Oil Prices Retreat as U.S.-Iran Diplomatic Talks Loom

Global oil prices extended their downward trend on Wednesday, driven by growing optimism that the United States and Iran may resume diplomatic negotiations to end regional hostilities. The potential for a peace deal comes as the market reacts to reports that talks could take place in Islamabad within the next 48 hours. This diplomatic push follows a fragile two-week ceasefire and aims to stabilize a region that has seen significant disruptions to energy transit. U.S. crude futures for May delivery fell 0.88% to $90.4 per barrel, while the international Brent benchmark for June delivery dropped 0.31% to $94.47. The International Energy Agency (IEA) highlighted that resuming flows through the Strait of Hormuz remains the single most critical variable for easing pressure on energy supplies and the global economy. However, current transit remains severely constrained; Goldman Sachs reports that flows are running at approximately 10% of normal levels, or roughly 2.1 million barrels per day on a four-day moving average. Further complicating the supply chain is a U.S. blockade targeting Iranian ports, which has already forced several vessels to turn back. Despite these constraints, Goldman Sachs noted that crude production disruptions in the Middle East appear less severe than initially feared. The firm estimates average shut-ins in the Persian Gulf at 8 million barrels per day for March, which is lower than the IEA's 10 million barrel estimate, partly due to the strategic use of storage and oil held on tankers.