Oil prices tumble amid renewed optimism over the Strait of Hormuz

Crude oil prices reversed their days long drop Wednesday, as new fears of Russian escalation in Ukraine and dwindling oil reserves at home overwhelmed the impact of potentially positive developments in the Middle East.

U.S. crude oil fell as low as $79 per barrel early Wednesday, for the first time since Aug. 13. International oil benchmark Brent dropped to around $85 barrel.

But around midday Wednesday, oil prices made an unexpected U-turn and moved slightly higher on reports of a plan by Russian President Vladimir Putin to escalate his war with Ukraine, four and a half years after the Kremlin first invaded its former Soviet satellite.

NBC News has not independently verified Bloomberg News’ reporting . But it served as a timely reminder of the pressure that global energy markets face from conflicts and supply disruptions far outside the Middle East.

Also driving oil up was an announcement from the U.S. Energy Information Administration that oil stockpiles had risen by fewer barrels than analysts were expecting. The report caused prices to move higher as it underscored the mammoth task ahead to replenish U.S. reserves that have been drained in recent months.

Just after 1 p.m. ET, oil prices were fractionally higher for the day.

The tumbling prices earlier in the day were fueled by reporting from several outlets that, taken together, could signal a shift in how both Tehran and Washington are approaching the war after six months.

The first of these developments was a reported renewal of talks between Iran and Oman about reopening the critical Strait of Hormuz in recent days.

The U.S. State Department is also preparing to return American diplomats to their posts at embassies across the Middle East, The New York Times reported on Tuesday.

And Secretary of State Marco Rubio told U.S. allies that the Trump administration does not expect to resume military strikes on Iran, according to comments reported by Axios.

Before the latest developments in Eastern Europe put an abrupt end to the drop in oil prices, comments by President Donald Trump on social media had helped boost Iran sentiment.

“I have just been informed by the United States Navy that all mines have been removed and/or detonated from within the International Waters of the Strait of Hormuz,” Trump posted on Tuesday .

The timing of the post raised eyebrows, however, because the text mirrors a Trump post from Aug. 18 , when he wrote that “all water mines have been removed or detonated.”

Shipping analytics firm Kpler on Wednesday reported that “Strait crossings remain subdued.” The firm assessed that just five vessels had transited the Strait on Tuesday, which was down from seven on Monday and nine on Sunday.

These figures represent just a tiny fraction of the pre-war daily average of 130 vessels.

The falling price of crude this week is the latest twist in what has been a roller coaster ride of a year for oil markets. Both WTI and Brent crude futures are down nearly 5% since Sunday.

After soaring to more than $110 per barrel in early April, U.S. crude oil dropped to the low $80s by the middle of that month before rebounding again to more than $100.

By the end of May, crude oil prices had come down into the $80s. But it was the ceasefire announcement in mid-June that pushed oil prices down further, to near pre-war levels of around $70 a barrel for WTI crude.

But these low prices did not last long. Throughout July, the lack of progress in U.S.-Iran negotiations and renewed U.S. strikes on Iran pushed prices back up. By the end of the month a barrel of U.S. crude was trading up into the low $90s.

These whipsawing energy prices helped kept inflation high in July, the Bureau of Economic Analysis reported Wednesday.

The Personal Consumption Expenditures index was unchanged from June, stuck at 3.7%. The lack of movement even extended to core PCE, the Federal Reserve’s preferred inflation gauge, which excludes the more volatile categories of food and energy and came in at 3.3%.

“The United States still has an inflation problem. PCE inflation came in hotter than expected,” said Heather Long, chief economist at Navy Federal Credit Union. “The impacts of the war in Iran are still apparent.”

The multi-day move lower in oil prices has also dragged bond yields lower. After trading at decades-high levels for days, the 10-year U.S. Treasury yield was trading around 4.6%, down from nearly 4.75%. The 30-year yield had fallen to around 5.18%, down from its recent high of more than 5.3%.

Mortgage rates also trended lower for a second straight day. The average 30-year fixed mortgage rate was 6.74% early Wednesday.

“When yields are falling, mortgage lenders are generally able to offer lower rates than they otherwise would have, depending on the timing and size of the move,” wrote Matthew Graham of data provider Mortgage News Daily on Tuesday.

Yet even as oil prices, bond yields and mortgage rates are falling, gas prices remain high for consumers.

Since Sunday, prices have largely remained flat and on Wednesday, the national average price per gallon ticked up to $4.10, AAA data shows .