Oil prices retreated to a certain extent on Wednesday, but remained at elevated levels amid a cautious atmosphere and uncertainty over the potential geopolitical developments in the Middle East and their impact on oil flows.
While hopes of a resolution to the tensions remain, changing rhetoric from the US administration could continue to fuel vigilance.
At the same time, the market remained constrained by the blockades in the Strait of Hormuz, although occasional tankers transit the waterway, leaving traffic near a standstill. The supply squeeze could leave the market under pressure, although the extension of a waiver for sanctioned Russian oil could provide some breathing room.
Looking ahead, oil markets are likely to remain highly sensitive to near-term geopolitical developments, in particular as US President Trump indicated a possible deadline in the coming days. As such, progress in negotiations could place downside pressure on prices, while any deterioration or renewed tensions could drive prices to the upside.
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