Oil extended declines as fresh diplomatic efforts helped renew optimism the Iran war would not escalate, while a US plan to ramp up economic pressure on Tehran spared the country’s trading partners from harsher measures for now.
Brent dropped nearly 4% to settle below $89 a barrel, the lowest level in over a week. West Texas Intermediate settled just over $82 after a spate of headlines helped ease traders’ concerns about a return to active fighting could further snarl shipping through the Strait of Hormuz.
Prices extended their decline to fresh lows after settlement on growing hopes that diplomatic efforts were gaining traction. Pakistan’s Army Chief concluded a one-day visit to Iran, with Iranian media saying the trip yielded valuable results. Iran and Oman, meanwhile, discussed an “interim framework” aimed at resuming shipping through the critical Strait of Hormuz, according to a joint statement carried by the Oman News Agency,
Investors have largely shrugged off US plans announced Monday to ratchet up economic pressure on Iran as President Donald Trump seeks to wind down the war. Washington stopped short of imposing secondary sanctions on nations dealing with Tehran, including China, the top buyer of Iranian crude. Countries will face a specific timeline to shut down links with Iran or face unilateral punishment, US Treasury Secretary Scott Bessent said.
While the Treasury added new restrictions on around 60 entities, including Tehran’s oil‑revenue generation networks and shadow fleet vessels moving its petroleum products, Bessent’s latest measures fell short of expectations.
“There was a lot of buildup around the announcement but what we got was more a warning about where policy is heading than an immediate shock to physical supply,” said Haris Khurshid, chief investment officer at Chicago-based Karobaar Capital LP. “Until secondary sanctions start changing who can buy, ship or even finance Iranian crude, I don’t think traders have much reason to add another geopolitical premium.”
Prices dipped earlier on Tuesday after the New York Times reported the US would be returning diplomats to Middle East embassies, suggesting Washington did not anticipate ramping up military action.
Crude is still up around 45% this year as the war — now in its sixth month — continues to disrupt the shipping of oil and refined fuels out of the Middle East. The impact has been particularly acute in fuel markets, which have also faced a hit from Ukrainian attacks on Russian refiners, pushing premiums to crude to stratospheric levels.
Russia is discussing extending its ban on diesel exports for another month as Ukraine continues to strike the nation’s refineries at a record pace, according to a person with knowledge of the matter.
At the same time, large volumes of crude supplies continue to transit Hormuz with their satellite signals turned off. Those volumes are in millions of barrels a day and have helped generally keep a lid on prices that had been expected to soar at the outset of the conflict.
“Positioning has moved from heavily short to more long, leaving the market vulnerable to profit-taking, while sanctions came in softer than feared and the diplomatic track appears to be gaining momentum,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “For now, more diplomacy, fewer signs of military escalation and improving flows are taking some of the geopolitical premium out of crude.”
To get Bloomberg’s Energy Daily newsletter in your inbox, click here.
With assistance from Will Kubzansky.
This article was generated from an automated news agency feed without modifications to text.
About The Author
