Oil prices fell on Wednesday, giving up a part of the previous sessions 4% rally as traders sought more clarity on the hampered negotiations between Iran and US that hinder efforts to reopen the Strait of Hormuz.
Brent crude traded near $100 per barrel. U.S. crude slipped 0.89% to $93.05 a barrel, while Brent eased 0.52% to $99.06 per barrel after surging nearly 4% in the previous session. WTI for July delivery declined 0.9% to $93.09 a barrel.
Crude oil prices on Multi Commodity Exchange (MCX) also witnessed a downward movement, with prices falling prices fell over 2% to ₹8,840 per barrel.
What is driving the oil price?
Iran’s Islamic Revolutionary Guard Corps said on Tuesday that it would respond to violations of the ceasefire after identifying and engaging U.S. drones and an F-35 fighter jet that had entered Iranian airspace.
The US military calling it an act of self defence targeted Iranian boats at Bandar Abbas -lined at the Strait of Hormuz. It alleged the former nation was attempting to deploy mines along with missile launch sites. U.S. Central Command said the operation was aimed at protecting American troops from threats posed by Iranian forces.
Adding another layer of uncertainty to the negotiations, was Trumps invitation to Gulf nations like Saudi Arabia, Qatar, Pakistan, Turkey, Egypt and Jordan to join the Abraham Accords, which seek to normalize diplomatic relations between Arab nations and Israel.
According to Analysts even if an agreement is reached, it could take months for shipping activity through the strait to fully recover and for damaged energy infrastructure to be restored.