Oil prices slid about 4% today on reports that the US had sent Iran a 15-point proposal aimed at ending the war, prompting talk of progress toward a ceasefire.
Brent futures fell $3.96, or 3.8%, to $100.53 a barrel by late afternoon, while US West Texas Intermediate crude fell $3.57, or 3.9%, to $88.78.
Pakistan has delivered a US proposal to Iran, and either Pakistan or Turkey could be a venue for discussions to de-escalate the war, a senior Iranian official told Reuters.
Iran has denied that direct talks had taken place and an Iranian military spokesman said the US is negotiating with itself.
"This latest price downturn largely relates to a 15-point US plan to end the war," analysts at energy advisory firm Ritterbusch and Associates said in a note.
"Iran has yet to indicate a positive response to the reported recent talks and until a greater definition is forthcoming regarding major progress, the oil market will remain vulnerable to another price up-spike."
Extreme price swings in recent weeks boosted Brent's historic or actual 30-day close-to-close volatility to its highest since April 2022 and WTI's volatility to its highest since June 2020.
The war has all but halted shipments of oil and liquefied natural gas through the Strait of Hormuz, which typically carries about one-fifth of the world's LNG and crude supply. The International Energy Agency has called it the biggest-ever oil supply disruption.
The result is a daily loss of around 20 million barrels of crude, meaning after 25 days a loss of some 500 million barrels, or five full days of global supply.
India, meanwhile, has bought its first cargo of Iranian liquefied petroleum gas in years after the US temporarily removed sanctions on Tehran's oil and refined fuels, sources said.
Japanese Prime Minister Sanae Takaichi asked IEA chief Fatih Birol for an additional coordinated release of oil stockpiles when they met on Wednesday, as Tokyo seeks to shield consumers from higher energy prices.
Despite the expectations of some analysts, the latest data from the US Energy Information Administration (EIA) showed the US did not start pulling crude out of its Strategic Petroleum Reserve (SPR) during the week ended March 20.
Iran has told the UN Security Council and the International Maritime Organisation that "non-hostile vessels" may transit the Strait if they coordinate with Iranian authorities, according to a note seen by Reuters yesterday.
Gulf Arab states told the UN Human Rights Council on Wednesday they face an existential threat from Iranian attacks on their infrastructure, which the UN rights chief said might constitute war crimes.
To offset the Hormuz disruptions, oil exports from Saudi Arabia's Red Sea Yanbu port rose to nearly 4 million barrels per day last week, a sharp increase from before the war broke out, shipping data showed.
Russia's Baltic ports of Primorsk and Ust-Luga, major export terminals, suspended crude oil and oil products loadings today after Ukrainian drone attacks sparked a blaze which could be seen from Finland, two sources told Reuters.
It was one of the largest strikes against Russia's oil export facilities in the four-year war.
Two stray Ukrainian military drones entered the airspace of Estonia and Latvia this morning via Russia, one of which slammed into a chimney at a local power station while the other crash-landed, the two Baltic countries said.
Russia remains in contact with the US on a possible settlement of the conflict in Ukraine and hopes Washington will continue its mediation efforts, Kremlin spokesman Dmitry Peskov said.
Elsewhere in Europe, German business morale fell sharply in March, as the Iran war made companies more pessimistic and threatened the long-awaited recovery of Europe's biggest economy. The German finance minister, meanwhile, set out sweeping reform plans to boost economic growth.
The US EIA said energy firms added 6.9 million barrels of crude into stockpiles during the week ended March 20.
That was higher than the 0.5 million barrel build analysts forecast in a Reuters poll and the 2.4 million barrel build that market sources said the American Petroleum Institute trade group reported yesterday.
