• Oil prices decline after a three-day rally amid concerns over a fragile Iran ceasefire.
• Brent crude futures fell by 0.76%, while West Texas Intermediate dropped by 0.65%.
• The ongoing conflict has begun to affect the US economy, contributing to inflationary pressures.

Oil prices fell on Wednesday after experiencing gains over three consecutive sessions, as investors awaited developments regarding the fragile ceasefire in the Iran conflict while U.S. President Donald Trump prepared for a high-stakes summit with Chinese President Xi Jinping. Brent crude futures lost 82 cents, or 0.76%, trading at $106.95 a barrel, while U.S. West Texas Intermediate futures fell 66 cents, or 0.65%, to $101.52, according to Reuters, Channel News Asia, and India Times.

The oil price reduction follows more than a 3% increase on Tuesday, as hope for a lasting ceasefire between the U.S. and Iran faded, diminishing expectations for the reopening of the Strait of Hormuz, a critical passageway for about a fifth of the world's oil and liquefied natural gas supplies. As noted, both benchmarks in oil trading have remained around or above the $100-per-barrel figure since the U.S. and Israel initiated attacks on Iran at the end of February, forcing Tehran to effectively shut down the strait, according to Reuters, Channel News Asia, and India Times.

President Trump stated he does not anticipate needing China’s assistance to resolve the conflict with Iran, despite increasing tensions and Iran's tightening control over the strait. This meeting comes as China remains the biggest buyer of Iranian oil, notwithstanding pressure from the Trump administration, as reported by Reuters, Channel News Asia, and India Times.

Market analysts suggest that the ongoing disruption in oil supplies could prolong high prices for months. According to the Eurasia Group, “The length of the disruption and the scale of the supply loss - already more than 1 billion barrels - means oil prices are likely to remain above $80 per barrel for the rest of the year.” This continued conflict’s impact on the broader U.S. economy has been evident, as higher oil prices are contributing to inflationary pressures, as noted by Reuters, Channel News Asia, and India Times.

The U.S. economy is feeling the strain, with consumer prices experiencing a significant rise for a second consecutive month, reflecting the largest annual inflation increase in nearly three years. This scenario adds to expectations that the Federal Reserve might keep interest rates unchanged longer than anticipated. Notably, the “marked increase in inflation across advanced economies has yet to cause real spending to contract, but the widespread decline in consumer sentiment and hiring intentions points to worse to come,” analysts from Capital Economics noted, according to Reuters, Channel News Asia, and India Times.

Furthermore, U.S. crude oil inventories have decreased for four consecutive weeks, with distillate inventories also reported to be declining, according to market sources citing American Petroleum Institute data. Upcoming official inventory figures from the U.S. Energy Information Administration are expected later in the day, with forecasts by a Reuters poll also indicating a continuation of this trend in stockpile reduction, according to Reuters, Channel News Asia, and India Times.