Oil prices declined as renewed prospects for negotiations between Iran and the United States eased market concerns over prolonged supply disruptions, although volatility remains amid ongoing geopolitical tensions—which continue to have significant implications for the local economy.

Global crude benchmarks fell after reports that Tehran had proposed fresh talks with Washington through intermediaries, raising hopes of a potential de-escalation in the conflict that has disrupted energy markets.

Reports said Brent crude settled at around $108 per barrel, while US West Texas Intermediate (WTI) dropped to about $102 per barrel, reflecting a pullback from recent highs as traders reacted to the diplomatic developments.

The decline follows a sharp surge in oil prices in recent weeks, with Brent crude briefly climbing above $126 per barrel—the highest level in four years—amid fears of supply shortages linked to the conflict and restricted flows through the Strait of Hormuz, a key global shipping route.

Despite the latest drop, analysts said prices remain elevated due to ongoing disruptions, including what has been described as a “dual blockade”—Iran’s continued restriction of the strait and US efforts to limit Iranian oil exports.

Market sentiment has been highly sensitive to developments in the Middle East, with even tentative diplomatic signals triggering price swings as traders reassess supply risks. Domestically, the continued disruption of the Strait of Hormuz—which accounts for about 20 percent of global oil exports—continues to be felt through elevated fuel prices and a weakened currency.

Despite government-mandated price cuts, pump prices remain about 60% higher than levels prior to the conflict’s escalation in early March. Industry sources also project another round of increases next week, with diesel expected to rise by as much as P2 per liter and gasoline by up to P3 per liter.

These elevated prices have contributed to a sharp acceleration in headline inflation, with the Bangko Sentral ng Pilipinas (BSP) projecting prices could rise by as much as 2.3 percent month-on-month in April as the oil shock spills over into other goods and services. The local equity market also weakened at the end of the shortened trading week, falling 1.26 percent to 5,833.64 on Thursday amid renewed volatility in global oil prices.

Meanwhile, the peso dropped to consecutive record lows this past week, reaching a new all-time low of P61.56 against the US dollar as of Wednesday, 29 April, driven by safe-haven demand for the dollar and elevated oil prices. The currency also touched an intraday low of P61.75 on Thursday as disruptions in the Strait of Hormuz again pushed oil prices higher.

That same day, the BSP flagged the peso’s depreciation as a contributing factor to rising inflation, which it now projects could reach as high as 6.4 percent amid the energy crisis and its second-round effects.

Given the Philippines’ status as a net oil importer, the economy remains highly sensitive to oil price fluctuations. While the prospect of renewed US–Iran talks could help ease supply constraints, uncertainty persists as both sides remain cautious and key issues unresolved.