Oil prices declined on Wednesday following U.S. President Donald Trump’s assertion that the conflict with Iran will conclude “very quickly.” However, investors continue to exercise caution regarding the prospects of peace negotiations, given the ongoing disruptions to Middle East supply stemming from the conflict. Brent crude oil futures experienced a decline of 45 cents, representing a 0.4% decrease, settling at $110.83 per barrel by 0050. In contrast, U.S. West Texas Intermediate futures decreased by 27 cents, or 0.3%, to reach $103.88. Both benchmarks declined by nearly $1 on Tuesday following remarks from U.S. Vice President JD Vance, indicating that the U.S. and Iran had made strides in negotiations, with both parties expressing a desire to avoid a return to military conflict.

Investors are eager to assess the potential for Washington and Tehran to establish common ground and achieve a peace agreement, particularly as the U.S. position evolves on a daily basis,” stated Toshitaka Tazawa. Oil prices are expected to stay high due to the potential for renewed U.S. attacks on Iran and the anticipation that, even with a peace agreement, crude supply will not swiftly rebound to pre-war levels,” he said. Despite Trump’s assertion to U.S. lawmakers late on Tuesday regarding a swift resolution to the conflict, he previously indicated that the United States might need to engage in further military action against Iran, revealing that he had been an hour away from authorizing an attack before ultimately deciding to postpone it. His remarks regarding the necessity to initiate further action followed a day after he indicated a halt to a proposed renewal of hostilities, prompted by a recent proposal from Tehran aimed at resolving the U.S.-Israeli conflict.

In his remarks on Tuesday, Trump indicated that Iran’s leaders are seeking a deal and cautioned that a new U.S. attack could occur in the coming days if an agreement is not reached. The ongoing U.S.-Israeli conflict with Iran has led to the practical shutdown of the Strait of Hormuz, a critical passage that typically facilitates approximately one-fifth of global oil supplies, resulting in the most significant oil supply disruption worldwide, as reported. Citi on Tuesday indicated that it anticipates Brent crude to increase to $120 a barrel in the near term, asserting that oil markets are underestimating the risk of a sustained supply disruption and wider tail risks.

In response to the deficit in global supplies resulting from the conflict, nations are turning to their commercial and strategic reserves. In the United States, crude oil inventories experienced a decline for the fifth consecutive week, as reported by market sources referencing data from the American Petroleum Institute released on Tuesday. Additionally, fuel stocks also saw a decrease. The Energy Information Administration’s report on U.S. crude stockpiles indicates an anticipated decline of approximately 3.4 million barrels for the week ending May 15, as per a poll. The weekly EIA data is scheduled for release later on Wednesday.