By: Economy Middle East

Oil prices fell more than two percent on Wednesday, extending the previous session’s decline, as renewed optimism over the potential reopening of the Strait of Hormuz weighed on the market. The shift came after Iran said it had resumed discussions with neighboring Oman on arrangements to manage the strategic waterway.

As of 4:25 GMT, Brent crude futures had declined $2.16, or 2.44 percent, to $86.42 a barrel, while U.S. West Texas Intermediate futures slipped $1.95, or 2.37 percent, to $80.41. Both benchmarks had dropped more than 3 percent in the previous session.

Iran and Oman discuss establishing joint temporary navigational corridor

Oil prices dipped as Iran said it had resumed talks with Oman on managing the Strait of Hormuz as Tehran faces growing economic pressure from U.S. President Donald Trump.

The two countries have held intermittent discussions for several weeks over the management of traffic through the strategic waterway, which accounted for around one-fifth of global oil and liquefied natural gas shipments before the war began in February.

On Tuesday, Iran and Oman said they had discussed establishing a “joint temporary navigational corridor” through the strait and agreed to undertake mine-clearing efforts.

Meanwhile, the United States has begun returning personnel to some diplomatic missions across the Middle East that were evacuated or scaled back amid tensions with Iran. The move indicates Washington may see a reduced risk of further escalation in the near term, although some embassies are expected to initially operate with limited staffing.

Strait of Hormuz tensions remain elevated

Washington also expanded sanctions on Monday targeting Iran’s economic lifelines, warning that countries continuing to conduct business with Tehran could face penalties. However, the U.S. said it would not immediately enforce the measures.

Tensions around the Strait of Hormuz remain elevated. On Tuesday, an oil tanker was hit by an unidentified projectile and disabled around 9 nautical miles (17 km) northeast of Oman’s Ash Shishah, near the entrance to the strait, according to the United Kingdom Maritime Trade Operations.

In the United States, crude oil inventories increased by around 4.2 million barrels in the week ended August 21, according to data from the American Petroleum Institute cited by market sources. The larger-than-expected build could add pressure to oil prices, with official inventory figures from the Energy Information Administration due at 14:30 GMT on Wednesday.