Energy Traders Monitor Strait of Hormuz and Diplomatic Signals
Oil prices declined on Wednesday after posting gains for three consecutive sessions, as investors closely monitored the fragile ceasefire surrounding the Iran war and awaited talks between US President Donald Trump and Chinese President Xi Jinping in Beijing.
Brent crude futures dropped 82 cents, or 0.76%, to $106.95 per barrel, while US West Texas Intermediate crude fell 66 cents, or 0.65%, to $101.52 during early trading.
Nevertheless, both benchmarks remained above the $100 mark for most of the conflict period since the United States and Israel launched attacks on Iran in late February. Subsequently, Tehran tightened control over the Strait of Hormuz, disrupting one of the world’s most critical energy routes.
Earlier this week, oil prices surged more than 3% after concerns grew that the US-Iran ceasefire might collapse, reducing hopes of reopening the strait. Nearly one-fifth of global oil and liquefied natural gas shipments normally pass through the waterway.
Meanwhile, Trump stated he did not believe China’s assistance was necessary to end the war, despite Beijing remaining the largest buyer of Iranian oil.
Inflation Fears and Falling Inventories Support Market Volatility
Analysts warned that prolonged supply disruptions could keep oil prices elevated throughout the year. Eurasia Group estimated that global supply losses had already exceeded one billion barrels, likely maintaining prices above $80 per barrel for the remainder of 2026.
At the same time, rising energy costs continued pressuring the US economy. Higher fuel prices contributed to another sharp increase in American inflation during April, strengthening expectations that the Federal Reserve would delay interest rate cuts.
Additionally, elevated borrowing costs threatened to weaken global oil demand in coming months.
Market sources also reported that US crude inventories declined for a fourth consecutive week, while distillate stockpiles fell further ahead of official government data scheduled for release later Wednesday.
