Oil Prices Decline Amid U.S.-Iran Tensions and Supply Concerns
Oil prices saw a modest decline during trading on Tuesday, as global markets assessed risks to supply amid escalating tensions between the United States and Iran, coupled with ongoing concerns about navigation security in the crucial Strait of Hormuz.
Brent crude futures fell by 25 cents, or 0.4%, to $68.79 per barrel by 01:02 GMT, while U.S. West Texas Intermediate crude dropped 23 cents, or 0.4%, to $64.13 per barrel, according to Reuters data.
This decrease follows a rise of over 1% on Monday, prompted by directives from the U.S. Maritime Administration advising U.S.-flagged commercial vessels to steer clear of Iranian territorial waters and to decline any Iranian boarding requests.
These directives are significant given the Strait of Hormuz's role in the global energy market, with approximately one-fifth of the world's oil passing through this route between Oman and Iran. Any security issues in the region pose a direct threat to global crude supply.
Iran and several OPEC member countries depend on the strait for the majority of their oil exports, particularly to Asian markets.
The U.S. warnings were issued despite the Iranian foreign minister's announcement that indirect nuclear discussions with the United States, facilitated by Oman, had commenced positively and would continue.
In this context, Tony Sycamore, an analyst at IG, noted in a client report that while the optimistic tone of the Oman talks is encouraging, it does not fully alleviate concerns. He added that uncertainty regarding potential escalations, tightening sanctions, or supply disruptions through the Strait of Hormuz maintains a limited but stable risk premium in oil prices.
Separately, a document reviewed by Reuters indicated that the European Union is considering expanding its sanctions on Russia to include ports in Georgia and Indonesia that handle Russian oil, marking a first-of-its-kind effort to target ports in third countries.
This initiative is part of broader European efforts to tighten restrictions on Russian oil exports, a key revenue source for Moscow amid ongoing pressures related to the war in Ukraine.
