Oil prices remained volatile on Wednesday as uncertainty over a possible agreement between the United States and Iran kept global markets on edge. Brent crude briefly climbed to $101 a barrel during US trading before retreating to around $98, as investors reacted to mixed signals surrounding efforts to end the conflict in the Middle East.

Market sentiment was initially supported after President Donald Trump struck an optimistic tone on the chances of reaching a deal. However, that optimism faded after Iranian media reported criticism of the US peace proposal by Iranian leaders. Tehran instead presented its own conditions for a ceasefire, including international recognition of its claimed right to control the Strait of Hormuz, one of the world’s most important routes for oil and gas shipments.

The sharp differences between the two sides have raised concerns that the conflict could continue for longer than markets had hoped. White House press secretary Karoline Leavitt said US military action was putting pressure on Iran to negotiate, adding that any failure to reach an agreement would be due to Iran refusing to accept that it had already been defeated.

Since the US and Israel launched attacks on Iran on 28 February, the conflict has sent shockwaves through global financial markets and pushed energy prices sharply higher. Iran’s effective blockade of the Strait of Hormuz has intensified the supply crisis, disrupting a waterway that normally carries around 20% of the world’s oil and liquefied natural gas.

The impact has been especially severe in Asia, where many countries rely heavily on Gulf energy supplies. Governments across the region have been forced to take unusual measures to secure oil and gas, while concerns about shortages are beginning to spread further afield. In the Philippines, President Ferdinand Marcos declared a state of emergency as the country grapples with its dependence on Gulf oil imports. Meanwhile, Shell warned that Europe could begin facing oil shortages as early as next month.

Even so, hopes that negotiations might still gain momentum offered some relief to investors. Oil prices pulled back from their highs, and broader risk sentiment improved across global markets. In the United States, major stock indexes closed higher, with the Dow Jones rising 0.6%, the Nasdaq gaining 0.7%, and the S&P 500 ending slightly in positive territory.

European markets also advanced, with the FTSE 100 closing 1.4% higher, Germany’s DAX rising 1.3%, and France’s CAC gaining 1.1%. Earlier in the day, Asia Pacific markets had also finished stronger, led by a 2.8% jump in Japan’s Nikkei 225 and a 1.5% rise in South Korea’s Kospi.

While hopes of a diplomatic breakthrough continue to support market sentiment at times, the ongoing gap between Washington and Tehran suggests that volatility in oil and financial markets is likely to remain elevated in the near term.

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