Oil prices fell by more than $1 a barrel on Monday as investors took profits ahead of an expected US announcement on new sanctions against Iran, raising concerns that further restrictions could disrupt crude supplies from the Middle East.
Brent crude futures fell $1.23, or 1.3%, to $93.16 a barrel by 0329 GMT. US West Texas Intermediate (WTI) crude declined $1.36, or 1.6%, to $85.70 a barrel.
Both benchmarks recorded their second consecutive weekly gains last week, rising by more than 5% as US-Iran peace talks reached a stalemate. The confrontation has restricted oil shipments through the Strait of Hormuz, a key global energy route that previously carried about one-fifth of the world’s oil supply.
US Treasury Secretary Scott Bessent is scheduled to hold a press conference at 2 p.m. EDT (1800 GMT) on Monday, where he is expected to outline further measures against Iran. Bessent has threatened what he described as the “toughest sanctions in history”, while President Donald Trump has also warned that countries trading with Iran could face sanctions.
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Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia, said it remained unclear whether Washington’s strategy of economically isolating Iran would achieve its intended results.
He warned that if the measures succeed, Iran could respond with increased military pressure, creating additional risks for global energy markets.
Iran has condemned the planned US sanctions, while President Masoud Pezeshkian has called for a diplomatic solution to the confrontation.
Market analysts are closely watching divisions within Iran’s leadership as Tehran weighs its response to mounting economic pressure.
“Pragmatic” elements of the Iranian leadership may favour de-escalation, while hardliners could push for continued confrontation, according to IG Markets analyst Tony Sycamore.
Iran’s oil exports face mounting pressure
Offers of Iranian crude to Chinese buyers have declined, while prices have risen as US restrictions disrupt Tehran’s oil shipments, according to trade sources.
However, Iran has allowed several Iraqi oil tankers to pass through the Strait of Hormuz following repeated requests from Baghdad, Iranian state news agency IRNA reported.
Analysts now expect the recovery of Middle Eastern oil supplies to take longer if the US-Iran conflict continues.
Morgan Stanley analysts said crude supplies were tightening, pointing to a sharp decline in oil held on water and falling onshore inventories, including in China.
They said reduced supplies from the Middle East had pushed regional exports back towards levels recorded in March and April, prompting them to slow their expectations for a recovery in regional oil flows.
The developments have left global energy markets focused on Washington’s next move and the potential impact of further sanctions on Iranian exports and shipping through the Strait of Hormuz.
