Oil prices whip around as U.S.–Iran talks shift traders from war risk to supply hopes

HOUSTON — Oil prices swung sharply this week as renewed U.S.–Iran diplomacy forced traders to recalibrate the two biggest variables driving crude right now: the risk of a military flare-up that could disrupt shipments from the Persian Gulf, and the possibility that progress at the negotiating table could eventually bring more Iranian oil into global markets.

Brent crude hovered near seven-month highs before easing, while U.S. benchmark West Texas Intermediate moved in the mid-$60s, with day-to-day trading increasingly tied to headlines out of Geneva, where U.S. and Iranian officials resumed indirect nuclear talks. Analysts have said crude has carried a geopolitical “risk premium” tied to fears of escalation, even as oversupply concerns and weak demand expectations have limited rallies.

The market’s push and pull has been clear: signs of diplomatic progress tend to pressure prices lower on expectations that sanctions could eventually loosen and more Iranian barrels could reach buyers, while harsh rhetoric or indications of military readiness push prices up on worries about disruption — especially through the Strait of Hormuz, a key chokepoint for global oil trade.

U.S. inventory data added another layer of volatility. A much larger-than-expected build in U.S. crude stockpiles helped cap gains and contributed to pullbacks even as geopolitical risks remained in focus, underscoring that supply fundamentals are still influencing prices alongside diplomacy.

OPEC+ policy is also in the background. The group has been weighing production strategy amid signs of a developing surplus, leaving traders to judge how much spare capacity could be brought online — and how quickly — if prices rise on geopolitics or fall on expectations of additional supply.

For energy traders and consumers, the near-term outlook hinges on whether negotiations reduce the risk of conflict or break down in a way that reintroduces fears of supply shocks. Either outcome can move prices quickly: de-escalation tends to shrink the risk premium, while renewed threats can widen it — turning the oil market into a daily referendum on diplomacy.