LONDON: Oil prices edged lower on Tuesday after sharp gains in the previous session, as investors remained cautious over mixed signals from US-Iran peace negotiations.
Market sentiment weakened as traders assessed whether diplomatic progress between Washington and Tehran could ease geopolitical risks in the energy market.
Crude Prices Fall After Strong Session
Brent crude futures fell by 75 cents, or 0.79%, to $94.23 per barrel at 0434 GMT. Meanwhile, US West Texas Intermediate (WTI) dropped 85 cents, or 0.92%, to $91.31 per barrel.
The decline followed a strong rally on Monday, when both benchmarks rose more than 5%. However, earlier in May, prices had fallen more than 16% on expectations of a potential peace deal.
Mixed Signals From US and Iran
Investor uncertainty grew after conflicting statements from US President Donald Trump and Iranian officials.
On Monday, Trump said talks with Iran were continuing. However, Iran’s Tasnim news agency reported earlier that Tehran had suspended indirect negotiations with Washington.
Trump also told CNBC that he would not be concerned if talks had ended. Shortly after, he suggested negotiations were still ongoing and expressed hope for progress in the coming days.
Market analysts said the uncertainty has kept a risk premium in oil prices.
Market Focus on Geopolitical Risks
Analysts noted that oil traders are closely watching developments in US-Iran relations.
Priyanka Sachdeva, senior market analyst at Phillip Nova, said markets had hoped for stability but continued uncertainty is limiting price direction.
Similarly, Tim Waterer of KCM Trade said investors are focusing on official statements, shipping activity, and tensions around the Strait of Hormuz.
He added that any clear breakthrough or breakdown in talks would determine whether the current risk premium remains in oil prices.
Lebanon Ceasefire Adds Regional Context
Meanwhile, Lebanon announced a partial ceasefire between Israel and Hezbollah on Monday. The move signals limited de-escalation in a wider regional conflict involving Iran and its allies.
However, tensions remain high across multiple fronts, keeping energy markets on edge.
Supply and Trade Developments Support Market Volatility
Iran has already restricted non-Iranian shipping in parts of the Gulf since the conflict escalated. This has disrupted a significant share of global oil and gas flows.
At the same time, US crude exports rose to a record 5.6 million barrels per day in May. Demand increased as Asian and European refiners turned to US supply amid Middle East instability.
Preliminary data also suggests US crude inventories likely fell by about 3.6 million barrels last week. Gasoline and distillate stocks are also expected to have declined.
Outlook Remains Uncertain
Shipping industry executives said any future US-Iran agreement would need clear maritime rules, especially regarding the Strait of Hormuz.
Until then, oil markets are expected to remain sensitive to geopolitical developments and shifting diplomatic signals from both sides.
