Oil prices rise by $1 as investors weigh Middle East peace prospects

Global oil prices climbed by more than $1 on Thursday, recovering part of the heavy losses recorded in the previous trading session as investors closely monitored developments surrounding possible peace negotiations in the Middle East.

Brent crude futures rose by 78 cents, representing a 0.8% increase, to trade at $102.05 per barrel by 0400 GMT. Meanwhile, West Texas Intermediate (WTI) crude gained 76 cents, or 0.8%, to reach $95.84 per barrel.

The rebound came after both oil benchmarks plunged by more than 7% on Wednesday, falling to their lowest levels in two weeks amid optimism that diplomatic efforts could bring an end to the ongoing Middle East conflict involving Iran and the United States.

However, market sentiment shifted after U.S. President Donald Trump stated that it was still “too soon” for direct face-to-face negotiations with Tehran. In addition, a senior Iranian lawmaker reportedly described the U.S. peace proposal as more of a “wish list” than a realistic agreement.

Analysts say uncertainty surrounding the negotiations continues to support elevated oil prices despite recent optimism.

Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, explained that while diplomatic discussions are likely to continue ahead of next week’s summit between President Trump and Chinese President Xi Jinping, the long-term outlook for oil markets remains unclear.

According to Kikukawa, the most likely scenario is for oil prices to remain high due to ongoing geopolitical risks and uncertainty surrounding global energy supplies.

Iran confirmed on Wednesday that it was reviewing a U.S.-backed peace proposal that sources say could formally end the conflict. However, key issues remain unresolved, including U.S. demands for Iran to suspend its nuclear programme and reopen the strategically important Strait of Hormuz, a critical global oil shipping route.

An Iranian Foreign Ministry spokesperson, quoted by Iran’s ISNA news agency, said Tehran would provide its official response soon. President Trump also expressed confidence that Iran was interested in reaching an agreement.

Sources involved in mediation efforts, including representatives from Pakistan, indicated that negotiations are progressing toward a one-page memorandum that could formally end the conflict.

Meanwhile, U.S. media outlet Axios reported that Washington expects Iran to respond to several major points within the next 48 hours. According to sources cited in the report, the current talks represent the closest both sides have come to a breakthrough since the conflict began.

Market analysts say the oil market remains highly sensitive to developments in the Middle East, with price movements increasingly driven by geopolitical headlines.

Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that investors have spent months balancing hopes for diplomacy against fears of supply disruptions.

She warned that if a formal peace agreement is reached, oil prices could decline sharply as geopolitical risk premiums disappear from the market. However, any renewed attacks on oil infrastructure or escalation of tensions could quickly send crude prices soaring again.

Despite optimism surrounding the negotiations, analysts expect global oil supplies to remain tight in the short term. Even if peace is achieved, it could take several weeks for oil exports from the Middle East Gulf to fully resume and reach refineries around the world.

As a result, many energy companies are expected to continue drawing from storage reserves to meet rising summer demand.

Further supporting prices, the Energy Information Administration reported on Wednesday that U.S. crude oil and fuel inventories declined again last week as countries attempted to offset supply disruptions linked to the Iran crisis.

According to the report, U.S. crude inventories fell by 2.3 million barrels to 457.2 million barrels. Analysts surveyed by Reuters had expected a larger decline of approximately 3.3 million barrels.