West Texas Intermediate (WTI) pulled back toward $97.20 during Wednesday’s Asian session after a strong rally earlier in the week. The decline comes as rising US inflation renewed concerns about the global demand outlook, tempering recent bullish momentum in energy markets.

Oil prices had surged nearly 8.5% over the previous two sessions, supported by geopolitical tensions and supply risks. However, the latest US inflation data shifted market sentiment. April’s Consumer Price Index came in hotter than expected, with headline inflation rising 3.8% year-on-year, above both forecasts and the previous reading.

Core inflation, which excludes food and energy, also accelerated to 2.8%, reinforcing expectations that price pressures remain persistent.

Stronger inflation typically supports a more restrictive monetary policy outlook. Markets now increasingly expect the Federal Reserve to maintain elevated interest rates for longer, with some participants also pricing in the possibility of another rate hike. Higher borrowing costs tend to slow economic activity, which in turn weighs on energy demand and limits upside potential for oil prices.

Geopolitical developments had previously supported the rally. Ongoing tensions between the United States and Iran, particularly the lack of progress in negotiations, continued to raise concerns over potential supply disruptions. Fears of instability around the Strait of Hormuz—a critical global oil transit route—added further upward pressure on prices.

Statements from Donald Trump also drew market attention, as he dismissed the need for external support in negotiations with Iran and expressed confidence in reaching an agreement independently. His remarks come ahead of a closely watched meeting with Xi Jinping, which could influence broader geopolitical dynamics and market sentiment.

For now, oil markets remain caught between competing forces. While supply-side risks continue to provide support, concerns over slowing demand driven by inflation and tighter monetary policy are beginning to weigh more heavily on prices.