Oil Extends Volatile Pullback

Oil prices moved sharply lower on Thursday as traders reacted to growing diplomatic momentum between the United States and Iran.

West Texas Intermediate crude futures briefly dropped as much as 5.5%, falling below the $90 per barrel level before recovering part of the decline later in the session.

The move followed Wednesday’s major selloff, when crude prices plunged roughly 8% after reports suggested both countries were nearing a possible agreement to end the conflict.

Despite the pullback, markets remain highly volatile as uncertainty continues surrounding the future of the Strait of Hormuz, one of the world’s most critical energy shipping routes.

US and Iran Continue Negotiations

The United States is reportedly awaiting Iran’s official response to a proposed memorandum of understanding that could eventually lead to the gradual reopening of the Strait of Hormuz.

According to reports, Iran is expected to deliver its response through Pakistan, which is acting as a mediator between both sides.

The proposal comes as Washington seeks a path to end the conflict that has severely disrupted global energy markets since late February.

President Donald Trump indicated Wednesday that the US would end its military campaign and remove its blockade if Iran agrees to the proposed framework, though he warned renewed military escalation remains possible if negotiations fail.

Hormuz Closure Continues to Disrupt Energy Markets

The Strait of Hormuz remains effectively closed despite hopes for diplomacy, continuing to strain global oil and natural gas supplies.

Before the conflict escalated, approximately 20% of global oil shipments passed through the strategic waterway daily.

The situation has created what analysts describe as a “double blockade,” with Iran obstructing maritime traffic while the US Navy restricts vessels connected to Iranian oil exports.

Although optimism surrounding negotiations has reduced some geopolitical risk premiums, shipping activity remains extremely limited as insurers, tanker operators, and traders remain cautious.

Analysts Warn Normalization Could Take Months

Energy analysts cautioned that even if an agreement is reached, a full normalization of shipping flows through Hormuz could take considerable time.

Concerns surrounding insurance coverage, maritime security, and logistical disruptions are expected to continue affecting global energy trade well beyond any diplomatic resolution.

Analysts at several firms noted that oil prices are likely to remain highly reactive to headlines as negotiations progress.

The market continues balancing hopes for de-escalation against the risk of renewed military escalation in the region.

Political Pressure Builds on White House

The Biden administration faces increasing pressure to stabilize energy markets as elevated fuel prices continue impacting consumers globally.

Surging gasoline prices in the United States have become a growing political issue ahead of upcoming elections, increasing urgency for a diplomatic breakthrough.

At the same time, global leaders including China have called for the rapid reopening of the Strait of Hormuz to restore energy stability and reduce economic risks worldwide.

President Trump is also expected to meet Chinese President Xi Jinping in Beijing later this month, with energy security likely to remain a major topic during discussions.

Market Outlook

Oil markets are expected to remain highly volatile in the near term as traders monitor negotiations between Washington and Tehran.

While hopes for a diplomatic agreement have significantly reduced some of the extreme risk pricing seen earlier in the conflict, uncertainty surrounding shipping access and regional security continues to support elevated oil prices.

Analysts believe energy markets will remain heavily driven by geopolitical developments until clearer evidence emerges that Hormuz shipping operations can safely resume.