Crude oil prices fell sharply in early Asian trade on Wednesday, with both major benchmarks dropping more than 5% as traders reacted to signs of potential de-escalation in the Middle East conflict and a crude inventory build in the U.S.
At the time of writing, WTI crude was trading at $88.05, down 4.29%, while Brent crude had fallen below $100 to $98.45, down 6.04%.
The selloff follows a volatile 48 hours in oil markets, during which prices surged after President Trump threatened to target Iranian power plants, and then fell when he suggested the countries were moving toward an agreement.
New reports indicate that the U.S. has sent a potential peace framework to Iran, sparking hopes of a temporary ceasefire. Iran further contributed to downward pressure on prices by circulating a letter to the International Maritime Organization stating that “non-hostile vessels” could transit the Strait of Hormuz in coordination with Iranian authorities.
President Trump said negotiations were progressing and that Iran was “talking sense,” while reports suggested a 15-point settlement proposal could pave the way for a one-month ceasefire. However, Iran has publicly denied that direct talks are taking place.
Adding to the downward pressure, particularly for WTI, the American Petroleum Institute (API) reported unexpected builds in crude and gasoline inventories for the week ending March 20.
Despite the price drop, underlying geopolitical risks remain significant, and the physical oil market continues to face supply shortages.
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