Oil falls below $99 on hopes of new US-Iran peace talks

Global oil prices eased Tuesday after the White House confirmed a second round of U.S.-Iran peace talks is under consideration, raising hopes for a diplomatic solution to the conflict that has threatened to create a prolonged energy shock.

"I can tell you we've been called by the other side. They'd like to make a deal very badly," President Donald Trump told reporters, a sentiment that cooled markets after talks collapsed over the weekend.

The price of global benchmark Brent crude fell by about 1 percent to $98.40 a barrel in Asian trading, while U.S. West Texas Intermediate crude dropped 1.7 percent to $97.40. The potential for a diplomatic breakthrough overshadowed earlier fears of a wider conflict after President Trump ordered a blockade of the Strait of Hormuz, a critical chokepoint for nearly a fifth of global oil and gas shipments. Asian stock markets responded positively, with Japan's Nikkei 225 gaining 2.6 percent.

The prospect of renewed negotiations introduces significant downside risk for oil prices, which analysts at JPMorgan Chase still expect to remain above $100 a barrel in the second quarter. A successful deal could lead to the removal of sanctions on Iranian oil, adding supply to the global market and putting further downward pressure on prices. The International Monetary Fund is expected to present scenarios this week predicting lower global growth and higher inflation driven by the conflict's impact on energy markets.

The diplomatic overtures follow a volatile period for energy markets. A temporary ceasefire had previously caused Brent crude to fall to $94.26 a barrel, a sharp drop from its wartime peak of $119.45. However, the failure of marathon negotiations in Pakistan led by U.S. Vice President JD Vance sent prices climbing again. Vance blamed the collapse on Tehran’s refusal to abandon its nuclear program, while Iranian sources cited “excessive” demands from Washington.

According to a New York Times report, the recent back-channel discussions included a proposal from Iran to suspend uranium enrichment for up to five years, which the U.S. rejected, insisting on a 20-year timeline. While a significant gap remains, the existence of traded proposals suggests a potential path to a peace deal.

The economic stakes are high, particularly for countries reliant on energy from the Gulf. U.S. Department of Energy Secretary Chris Wright warned on Monday that he expected oil prices to peak in the coming weeks as the Strait of Hormuz remains effectively closed. "We're going to see energy prices high - and maybe even rising - until we get meaningful ship traffic through the Strait of Hormuz," Wright said. The conflict has already spurred social unrest over the rising cost of living in countries like Ireland.

This article is for informational purposes only and does not constitute investment advice.