Global oil prices edged lower on Wednesday, extending losses recorded in the previous session as investors continued to assess the implications of a developing peace agreement between the United States and Iran.
Brent crude futures fell by 16 cents, or 0.2 per cent, to $78.80 per barrel, while U.S. West Texas Intermediate (WTI) crude declined by 25 cents, or 0.3 per cent, to $75.80 per barrel in early trading.
The latest decline follows sharp losses on Tuesday, when both benchmarks dropped by approximately five per cent for a second consecutive session, reaching their lowest levels in three months.
Market sentiment has been buoyed by expectations that the emerging U.S.-Iran agreement could pave the way for the resumption of oil flows through the Strait of Hormuz, one of the world’s most strategic energy transit routes.
Under the reported terms of the agreement, the United States would lift restrictions affecting Iranian ports, while Tehran would permit unrestricted tanker traffic through the Strait, which has faced significant disruptions since military strikes by the United States and Israel on February 28.
The prospect of increased crude supply from the Middle East has eased concerns over potential shortages and contributed to downward pressure on oil prices.
Analysts, however, cautioned that market volatility is likely to persist, with WTI expected to trade within a broad range around the $80-per-barrel mark as investors await further clarity on the agreement and regional developments.
Details of the interim peace arrangement began emerging on Tuesday, with U.S. President Donald Trump stating that the agreement would prevent Iran from acquiring nuclear weapons.
A U.S. official also indicated that the deal would allow Iran to resume oil sales once formally signed.
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The memorandum of understanding, which has not yet been publicly released, reportedly extends a fragile ceasefire reached in April by an additional 60 days to provide time for negotiations toward a more permanent settlement.
Despite the optimism, industry experts have warned that restoring Iran’s oil production, refining operations and export capacity to pre-conflict levels could take several weeks, months or even years.
Uncertainty surrounding the agreement remains, particularly after Israel distanced itself from both the earlier ceasefire and the latest U.S.-Iran understanding.
Concerns over regional stability were further heightened after Israeli drone strikes reportedly targeted three vehicles in southern Lebanon on Tuesday, resulting in multiple casualties.
The incident drew a rare public criticism from President Trump and raised questions about the durability of the broader peace process.
Nevertheless, expectations of additional crude supply have reinforced investor confidence in the resumption of Middle East energy exports.
The development has also contributed to lower yields on U.S. Treasury securities and sparked a rally in global bond markets.
Market participants will continue to monitor developments surrounding the U.S.-Iran negotiations, regional security conditions and the pace of any potential recovery in oil production and exports, all of which are expected to influence energy prices in the coming weeks.