Crude Oil Pulls Back as U.S.–Iran Talks Reduce Supply Risk

Key Moments

Renewed Diplomatic Effort Eases Immediate Market Jitters

Oil prices moved lower by about 2% on Thursday after the United States and Iran agreed to hold talks in Oman on Friday, tempering fears that an armed clash between the two countries could interrupt supplies from the major producing region in the Middle East.

As of 0335 GMT, Brent crude futures had fallen $1.44, or 2.07%, to $68.02 per barrel. U.S. West Texas Intermediate (WTI) crude slipped $1.34, or 2.06%, to $63.80.

The decline followed a sharp move higher on Wednesday, when crude benchmarks jumped about 3% after a media report indicated the planned U.S.-Iran talks could be scrapped. Subsequent comments from officials on both sides confirmed that the meeting in Oman would proceed, although they said the agenda had not yet been finalized.

Geopolitical Risk Premium Pulls Back – For Now

Market participants viewed confirmation of the talks as a partial de-escalation of immediate geopolitical risk, prompting some unwinding of the recent risk premium built into oil prices.

“The oil price has erased part of the geopolitical risk premium on the news of US-Iran talks in Oman on Friday,” said Mukesh Sahdev, CEO of energy consultancy XAnalysts.

Despite the scheduled talks, positions between Washington and Tehran remain far apart. According to the article, Iran is prepared to engage with Western nations on its nuclear program, including uranium enrichment. The United States, however, is seeking to broaden the scope of discussions to cover Iran’s ballistic missile activities, its backing for armed proxy groups across the Middle East, and its domestic human rights record.

“It is likely that these talks will surface new differences and the risk premium will rise again soon,” Sahdev said.

#Oil prices fell as geopolitical and supply disruption fears eased ahead of expected US-Iran talks, keeping unfavourable fundamentals and #Crude glut risks in focus.

This leaves $USOIL vulnerable to sub-EMA200 moves that would reaffirm the bearish outlook, though the commodity… pic.twitter.com/hLW7CUG3cZ

— FXCM (@FXCMOfficial) February 5, 2026

Persistent Fears Over Potential Supply Disruption

Even with diplomatic efforts under way, there are ongoing concerns that U.S. President Donald Trump could still act on threats to strike Iran, identified as the fourth-largest producer within the Organization of the Petroleum Exporting Countries (OPEC). Such action could raise the risk of a broader confrontation in the oil-producing region.

Beyond possible direct impacts on Iranian output, the market is looking at the broader implications for exports from neighboring Gulf producers. A significant portion of global oil flows through critical shipping lanes in this area.

Roughly one-fifth of worldwide oil consumption passes through the Strait of Hormuz, located between Oman and Iran. Other OPEC members – Saudi Arabia, the United Arab Emirates, Kuwait and Iraq – ship most of their crude through this waterway, in addition to Iran itself.

Broader Market Context and Inventory Data

Analysts also cited a stronger U.S. dollar and heightened volatility in precious metals as additional pressures on commodities and overall risk appetite on Thursday.

On the fundamental side, recent U.S. government data pointed to a drawdown in oil stockpiles. Figures released by the Energy Information Administration on Wednesday showed that U.S. crude inventories fell last week. The decline came after a winter storm swept across large parts of the country. The United States is described in the article as the world’s biggest crude producer and consumer.