Oil retreated nearly 3% as US-Iran talks in Oman diffuse supply fears

Crude oil futures settled sharply lower on Thursday, giving back recent gains as the geopolitical risk premium deflated following the announcement of imminent diplomatic talks between the US and Iran. 

Brent crude futures settled down $1.91, or 2.75%, at $67.55 per barrel.

WTI crude settled down $1.85, or 2.84%, at $63.29 per barrel.

The sell-off was ignited by confirmation that Washington and Tehran have agreed to convene in Oman on Friday, a move traders interpreted as a potential de-escalation ramp. The news triggered immediate profit-taking, stripping out the war premium that had built up earlier in the week amid fears of a wider conflict disrupting flows through the Strait of Hormuz.

Bearish momentum was further compounded by a strengthening US dollar, which weighed on the broader commodities complex. A firmer greenback typically pressures oil prices by raising costs for holders of other currencies, limiting demand at the margin. This macro headwind coincided with elevated volatility in precious metals, reinforcing the risk-off sentiment across asset classes.

Market participants noted that the abrupt reversal marked a decisive shift in near-term psychology, with prices recalibrating to reflect the potential for a diplomatic pause. In the absence of a fresh escalation, traders liquidated long positions to lock in gains from the year's earlier rally, signaling that the market requires new catalysts to sustain prices above the $65 threshold.

Written by: Aiman Haikal