Oil dropped on signs Washington and Tehran may revive peace talks following the start of a US blockade of the Strait of Hormuz.
Brent fell toward $97 a barrel, while West Texas Intermediate shed as much as 3.4 per cent to $95.69. The two sides are in discussions on holding another round of face-to-face negotiations for a longer-term ceasefire, according to people familiar with the matter. The goal is to hold them before the expiration of a two-week pause in hostilities that was announced April 7, they said.
US President Donald Trump said earlier that Tehran had reached out, telling reporters: “We’ve been called this morning by the right people, the appropriate people, and they want to work a deal.”
Iranian President Masoud Pezeshkian, meanwhile, said that the country was prepared to continue peace talks solely within the framework of international law and regulations.
The oil market has been roiled by the war between the US, Israel and Iran, which is now in its seventh week. The conflict triggered an unprecedented shock as energy infrastructure was hit and Iran choked off traffic through the Strait of Hormuz. On Monday, the US raised the stakes with its own blockade of vessels heading for or leaving Iran’s Persian Gulf ports or coastal areas.
Still, Saudi Arabia is pressing the US to drop its blockade of the strait and return to the negotiating table, the Wall Street Journal reported, citing unidentified Arab officials. The pushback comes amid concern Trump’s move could lead Iran to disrupt other important shipping routes, the report said.
The prospect of renewed talks will help “cap outright moves in Brent and WTI futures,” said Robert Rennie, head of commodity and carbon research at Westpac Banking Corp. “Even if diplomatic signals keep headline benchmarks anchored around or below $100, the underlying supply squeeze is intensifying, with real-economy fuel prices likely to remain under upward pressure as long as flows through Hormuz remain effectively constrained.”
Both gasoline and diesel retail costs in the US rose to the highest levels since 2022 earlier this month. Meanwhile, jet fuel and diesel prices in Europe have soared to all-time or near-record highs above $200 a barrel.
Acknowledging the pain for US consumers caused by spiking gasoline prices, Vice-President JD Vance — who led the US delegation in unsuccessful talks with Iran at the weekend in Pakistan — said the blockade imposed on Tehran’s oil increased US leverage for negotiations.
“I do think that we’re in a place where we’ve accomplished our objectives,” Vance told Fox News. “We can start to wind this thing down.”
Shipping through the Strait of Hormuz slumped back down again Monday, reversing a jump on Sunday, as caution mounted ahead of the US blockade. Still, three tankers did successfully clear the waterway.
The US naval action “will certainly raise economic pressure on Iran,” said Will Todman, senior fellow in the Middle East Program at the Center for Strategic and International Studies. “But Iran is not the only actor to suffer the economic consequences. A US blockade will also exacerbate the pressure on energy prices and cause more damage to the global economy.”
Later Tuesday, the International Energy Agency is due to release its monthly market report, which will shed fresh light on supply-and-demand dynamics. On Monday, IEA Executive Director Fatih Birol said oil prices didn’t yet reflect the severity of the supply crisis, but they soon would.
The war has forced deep shut-ins of production across West Asia, with OPEC crude output registering a record plunge last month as the conflict throttled exports from key members, the group’s data showed Monday.
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