Oil Prices Decline Amid U.S.-Iran Tensions and Supply Concerns
Oil prices experienced a slight decline in trading on Tuesday as global markets assess potential supply risks amid rising tensions between the United States and Iran, alongside ongoing concerns about navigation security in the vital Strait of Hormuz.
Brent crude futures fell by 25 cents, or 0.4%, to $68.79 per barrel at 01:02 GMT, while U.S. West Texas Intermediate dropped 23 cents, also 0.4%, to $64.13 per barrel, according to Reuters data.
This decline follows a robust increase of over 1% on Monday, prompted by guidance from the U.S. Maritime Administration urging American-flagged commercial vessels to avoid Iranian territorial waters and to refuse any Iranian boarding requests in case of incidents.
These directives are particularly significant given the Strait of Hormuz's central role in the global energy market, through which approximately one-fifth of the world’s oil is transported between Oman and Iran, making any security escalation in the region a direct threat to global crude supplies.
Iran, along with several OPEC member countries, relies on the Strait for exporting the majority of its oil production, primarily to Asian markets.
U.S. warnings come despite comments from the Iranian foreign minister, who stated that indirect nuclear negotiations with the U.S. through Oman had begun "positively" and are expected to continue in the coming weeks.
In this context, IG analyst Tony Sycamore noted in a client report that the cautiously optimistic tone surrounding the discussions in Oman is insufficient to fully alleviate concerns, adding that ongoing uncertainty regarding potential escalations, sanctions, or supply interruptions through the Strait of Hormuz keeps a limited but stable risk premium on oil prices.
Additionally, a document reviewed by Reuters indicated that the European Union has proposed expanding its sanctions against Russia to include ports in Georgia and Indonesia dealing with Russian oil, marking a first where the EU targets ports in third countries.
This initiative is part of increasing European efforts to tighten restrictions on Russian oil exports, a key revenue source for Moscow amid ongoing pressures related to the war in Ukraine.
