Oil prices edged lower on Wednesday after U.S. President Donald Trump again said the war with Iran would end “very quickly,” although traders remained cautious as talks continued and Middle East supply disruptions kept markets on edge.
Brent crude futures fell 45 cents, or 0.4 percent, to $110.83 a barrel by 0050 GMT. U.S. West Texas Intermediate crude dropped 27 cents, or 0.3 percent, to $103.88.
Both benchmarks had fallen nearly $1 on Tuesday after U.S. Vice President JD Vance said Washington and Tehran had made “a lot of progress” in talks, adding that neither side wanted a return to military action.
Investors are now watching whether the U.S. and Iran can reach a deal after days of shifting signals from Washington.
Toshitaka Tazawa, an analyst at Fujitomi Securities, said markets were trying to assess whether the two sides could find common ground, but warned prices were likely to stay high because of the risk of renewed U.S. strikes and uncertainty over how quickly supply could recover even if an agreement is reached.
Trump told U.S. lawmakers late Tuesday that the conflict would end quickly, but earlier said the United States might need to strike Iran again. He also said he had been an hour away from ordering an attack before postponing it.
The comments followed his statement a day earlier that he had paused a planned resumption of hostilities after Tehran presented a new proposal to end the U.S.-Israeli war.
Trump also said Iranian leaders were “begging” for a deal and warned that a new U.S. attack could come within days if no agreement is reached.
The war has effectively closed the Strait of Hormuz, a critical waterway that normally carries about one-fifth of global oil supplies. The International Energy Agency has described the disruption as the largest oil supply shock in the world.
Citi said Tuesday it expects Brent crude to rise to $120 a barrel in the near term, arguing that markets are underpricing the risk of a prolonged supply disruption and wider fallout.
With supplies strained, countries have been relying on commercial and strategic inventories to cover the shortfall.
In the United States, crude inventories fell for a fifth straight week last week, according to market sources citing American Petroleum Institute data released Tuesday. Fuel stocks also declined.
Official data from the U.S. Energy Information Administration is due later Wednesday. Analysts polled by Reuters expect crude inventories to have fallen by around 3.4 million barrels in the week ending May 15.