EMEA crude futures tumbled by more than 5% in after-hours trading on Wednesday after President Trump said negotiations with Iran were in their "final stages," easing concerns over supply disruptions from the Middle East.
Brent crude futures dropped by 5.15% to $105.69 per barrel, while Murban oil futures fell by 4.47% to $102.51/bbl.
On Wednesday, Trump said that negotiations with Iran were in the final stages but warned of further attacks unless Tehran agrees to a deal.
"We're in the final stages of Iran. We'll see what happens. Either have a deal, or we're going to do some things that are a little bit nasty, but hopefully that won't happen," Trump told reporters on Wednesday.
Saxo Bank strategists said that Trump warned that US strikes on Iran could resume within days if peace talks fail, adding to market volatility.
VP Vance said on Tuesday that the US and Iran have made significant progress in their talks and that neither side wants to see a resumption of the military campaign. "We think that we've made a lot of progress. We think the Iranians want to make a deal," Vance told reporters at a White House briefing.
"The uncertainty surrounding talks, sanctions policy, and the duration of supply disruptions continues to keep energy markets volatile despite the temporary easing in geopolitical tensions," Soojin Kim, research analyst at MUFG, said on Tuesday.
Meanwhile, Iran's Revolutionary Guard threatened to extend the Middle East conflict "beyond the region" if the US and Israel resume attacks against Tehran.
"If aggression against Iran is repeated, the regional war that had been promised will this time be drawn beyond the region, and our crushing blows will lay you in black dust in places you cannot imagine," the IRGC said on Wednesday.
The Middle East conflict, now in its 12th week, has choked traffic through the Strait of Hormuz, keeping global energy markets tight, driving energy prices and inflation higher.
Kpler said the US blockade of Iranian ports is emerging as a central pressure point in the Trump administration's Iran strategy, with no Iranian crude tanker crossing the designated blockade line since April 13.
Crude loadings have fallen to about 640,000 barrels per day from about 2.1 million b/d previously, the data showed.
On the supply front, Adnoc Group's managing director and CEO, Sultan Al Jaber, said on Wednesday that it will take at least four months to reach 80% of pre-conflict flows.
US crude oil inventories dropped by 7.9 million barrels to 445 mmbbls in the week ended May 15, the Energy Information Administration said in its weekly report on Wednesday. Crude inventories are now about 2% below the five-year average for this time of year, the EIA said.