Oil falls over 6% as U.S.-Iran tensions ease

Oil prices plunged more than 6% on Wednesday, erasing the sharp gains triggered earlier in the week by escalating tensions between the United States and Iran. The drop came after both sides signaled a de-escalation of the conflict, calming fears of a major disruption to crude supplies from the Middle East.

The decline hit global benchmark Brent crude and U.S. West Texas Intermediate (WTI) futures, which had surged to four-month highs on Monday following a U.S. airstrike that killed Iranian General Qassem Soleimani. Iran retaliated with missile attacks on Iraqi bases housing U.S. troops, but no casualties were reported, and President Donald Trump indicated a willingness to step back from further military action.

Investors interpreted the muted response as a sign that neither side seeks a full-scale war, reducing the risk of a supply outage from the region that pumps about a fifth of the world's oil. The price retreat highlights how quickly geopolitical risk premiums can evaporate when conflict appears contained.

On Wednesday, Brent crude fell $3.35, or 4.9%, to $65.54 a barrel by 11:40 a.m. ET, after earlier dropping as much as 6.3%. WTI crude slid $3.09, or 5.1%, to $59.63 a barrel, having lost over 6% at its session low. The moves wiped out most of the gains from the previous two sessions.

Analysts noted that the market had priced in a worst-case scenario that did not materialize. The absence of supply disruptions and the possibility of renewed diplomatic talks between the U.S. and Iran could keep prices under pressure in the near term. However, the situation remains fluid, and any new escalation could quickly reverse the losses.