Oil prices dipped on Wednesday, as markets kept tabs on a trip by U.S. and Iranian delegates to Qatar for separate peace talks with mediators.

At 04:50 ET (08:50 GMT), U.S. Crude Oil WTI Futures dropped 1.2% to $68.68 a barrel, while Brent Oil Futures retreated by 1.2% to $72.12 a barrel.

Traders remained focused on developments in Doha after Iran ruled out direct talks with senior U.S. envoys who had traveled to the region, instead saying any discussions would be conducted through mediators at the technical level. The shift clouded prospects for a swift agreement to turn the two-week-old ceasefire into a lasting peace deal.

The recovery follows a sharp pullback in crude prices after the Iran conflict. Brent tumbled about 38% during the second quarter after surging roughly 94% in the first quarter, marking its steepest quarterly decline since the record 66% plunge in the first quarter of 2020. The global benchmark also fell about 21% in June after a 19% decline in May, its biggest monthly drop since March 2020, as fears of prolonged supply disruptions through the Strait of Hormuz eased.

Geopolitical risks remain in focus

The absence of direct talks has reinforced uncertainty over how quickly Washington and Tehran can resolve outstanding issues under their 60-day negotiating framework, including the future of the Strait of Hormuz.

While the weekend saw renewed exchanges that briefly rattled the fragile truce, shipping through the Strait of Hormuz has begun to recover, with Kpler data showing about 24 commodity vessels, including crude and LNG tankers, transited the waterway on Monday, with traffic remaining steady into Tuesday.

ANZ said hopes for a lasting peace agreement weighed on crude prices, but cautioned that uncertainty over the future governance of the Strait of Hormuz continues to cloud the outlook. The bank noted Iran has reiterated its intention to oversee maritime traffic through the strategic waterway, underscoring that shipping security remains a key risk for energy markets.

Supply outlook remains uncertain

On the supply side, fresh U.S. Energy Information Administration data showed domestic crude production climbed to a record 13.93 million barrels per day in April, as producers ramped up output in response to higher prices during the Iran conflict.

While stronger U.S. supply could limit further gains, analysts believe geopolitical risks continue to provide underlying support. ANZ’s China Commodity Index rose 0.5%, with the energy component also advancing 0.5%, pointing to resilient commodity demand even as crude prices have retreated from recent highs.

Markets are now watching for further progress in the Doha negotiations and upcoming U.S. inventory data for fresh direction on oil prices.