Oil prices extend slide as Iran and Oman eye temporary Hormuz deal

Oil prices experienced a 2% decline on Wednesday, building upon the previous day's downward trend, as optimism grew that the Strait of Hormuz could once again be accessible. Brent crude futures experienced a $1.78 drop, or 2.0%, bringing the price to $86.80 a barrel by 0027 GMT. Similarly, U.S. West Texas Intermediate crude futures decreased by $1.49, or 1.8%, to $80.87.

Analysts noted that market reactions to Iran and Oman's discussions on managing the strategic waterway have influenced the price shifts. Mitsuru Muraishi, an analyst at Fujitomi Securities, explained that while the prospect of progress in the talks has spurred selling, uncertainty over the outlook has led to bargain buying, thereby preventing further losses.

Prices are expected to remain within a specific range for now. Iran announced that it had resumed negotiations with Oman to manage the Strait, following heightened economic pressure from the U.S. President Donald Trump. Both nations had been in intermittent talks for weeks about establishing a joint temporary navigational corridor in the strait and agreed to clear it of mines.

U.S. personnel are gradually returning to some Middle East diplomatic missions that were either evacuated or reduced due to tensions with Iran, signaling a belief among Washington that the risk of the conflict escalating in the near future is lower. However, some embassies will initially operate at reduced capacity. Additionally, the U.S. expanded sanctions to choke Iran's economic lifeline, threatening to punish countries that continue engaging in trade with Tehran, although no immediate penalties are expected.

Separately, an oil tanker was hit by an unidentified projectile and disabled approximately 9 nautical miles northeast of Oman's Ash Shishah, the United Kingdom Maritime Trade Operations reported. American Petroleum Institute data indicated that crude oil inventories increased by about 4.2 million barrels in the week ending August 21, with analysts estimating an average rise of 600,000 barrels.

The official data from the EIA, the statistical arm of the U.S. Department of Energy, will be released on Wednesday at 10:30 a.m. ET.