Oil prices fell on Wednesday, erasing earlier gains, after a report that Iranian operatives sought talks with the U.S. to end the war on Iran, which is disrupting Middle East energy flows, Reuters reported.
Brent crude was down 50 cents, or 0.6%, to $80.90 per barrel by 1318 GMT, after hitting a high of $84.48 earlier in the session.
U.S. West Texas Intermediate crude was down 88 cents, or 1.2%, to $74.96, a day after settling at its highest since June.
The New York Times reported operatives from Iran's Ministry of Intelligence signalled openness to the U.S. Central Intelligence Agency to talks on ending the war, citing officials briefed on the matter.
U.S. Defense Secretary Pete Hegseth said on Wednesday the United States was winning in the war against Iran and that the U.S. military could fight as long as needed.
"While flows through the Strait of Hormuz remain disrupted, market participants seem to expect a de-escalation of the conflict and a resumption of oil flows," UBS analyst Giovanni Staunovo said.
"The market should, however, also focus on the risk of further production shut-ins if flows through the Strait remain disrupted, in my view."
Israeli and U.S. forces have struck targets across Iran, prompting Iranian retaliatory strikes against energy infrastructure in a region that accounts for just under a third of global oil production.
Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries, has cut output by nearly 1.5 million barrels a day, about half its production, due to storage limits and the lack of an export route, officials told Reuters.
They said the country may have to shut nearly 3 million bpd of output within days if exports do not resume.
Iran has also targeted tankers in the Strait of Hormuz, through which about a fifth of the world's oil and liquefied natural gas flow. Traffic through the Strait remains effectively closed.
Trump said the U.S. Navy could begin escorting oil tankers through the Strait if necessary, adding that he had ordered the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf.
"While oil prices declined on the headline, we think the insurance proposal is likely in a concepts-of-a-plan stage and question whether there has been sufficient coordination with the multiple international tanker insurers," RBC analyst Helima Croft said.
Countries and companies have begun seeking alternative routes and supplies of crude. India and Indonesia said they were looking for other supplies, while some Chinese refineries were shutting or moving up maintenance plans.
In the United States, crude stocks rose by 5.6 million barrels last week, according to market sources citing American Petroleum Institute figures, well above the 2.3 million projected by analysts.
Official figures from the U.S. government are expected later on Wednesday.
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