By: Economy Middle east

Oil prices fell over 4 percent on Wednesday due to the prospect of a possible ceasefire, which could ease supply disruptions from the primary Middle East producing region. This shift followed reports that the U.S. had sent a 15-point plan to Iran aimed at concluding the conflict between the two nations. 

Brent crude futures dropped $4.46, or 4.45 percent, to $95.77 a barrel by 9:20 Dubai time. Similarly, U.S. West Texas Intermediate (WTI) crude futures decreased by $3.78, or 4.09 percent, to $88.57 a barrel after falling as low as $86.72. These declines followed a volatile Tuesday session where both benchmarks had risen nearly 5 percent before paring those gains.

Hormuz disruption hits supply

U.S. President Donald Trump stated on Tuesday that the United States is making progress in negotiating an end to the hostilities with Iran. Adding to the diplomatic momentum, the Prime Minister of Pakistan expressed a willingness to host talks between Washington and Tehran. The ongoing conflict has nearly halted the shipment of oil and liquefied natural gas through the Strait of Hormuz, a waterway that typically carries about one-fifth of the global supply of crude and gas. The International Energy Agency has characterized this situation as the largest-ever disruption to the oil supply.

Saudi reroutes oil flows

To mitigate the impact of the disruptions in the Strait of Hormuz, Saudi Arabia has significantly increased its exports through the Red Sea. Shipping data indicates that oil exports from the Yanbu port rose to nearly 4 million barrels per day last week, representing a sharp increase from levels recorded before the conflict began. This strategic shift highlights the importance of alternative transport channels in maintaining the flow of energy to global markets during regional instability.