Brent crude and WTI benchmarks dropped approximately 1% on Wednesday, extending a three-day losing streak as markets digested reports of progress in indirect talks between the United States and Iran regarding the Strait of Hormuz.
Qatar announced that the negotiations had advanced, signaling a potential de-escalation of tensions that have previously threatened commercial shipping routes through the vital waterway.
The development has prompted traders to unwind risk premiums associated with supply disruption fears.
The sell-off comes after oil prices reversed earlier gains on Monday following reports that the US and Iran had agreed to a ceasefire, which included commitments to maintain the flow of commercial shipping.
Prior to that, prices had risen on Monday as shipping through the Strait slowed during the initial, bumpy stages of talks under an interim peace deal.
Market participants are now balancing the diplomatic progress against broader concerns about a potential global supply surplus.