Global oil prices fell nearly 2% on Tuesday morning, even as a US naval blockade of Iranian ports and the Strait of Hormuz began taking effect — a sign that markets are betting on diplomacy over disruption.
The decline followed signals that backchannel talks between Washington and Tehran may still be alive despite the collapse of negotiations in Islamabad.
At 7:25 AM, the June contract of benchmark Brent crude on the Intercontinental Exchange was trading at $97.80, down 1.59%, while the May contract of West Texas Intermediate on the NYMEX fell 2.02% to $97.08 a barrel.
The pullback comes after crude surged more than 7% on Monday, briefly crossing the $100-per-barrel mark, following the failure of ceasefire efforts and US President Donald Trump’s threat to impose a .
On Monday, Trump claimed that Iran has reached out after the collapse of negotiations in Islamabad and that Tehran “wants to make a deal very badly”. Reports suggest diplomatic efforts between the two countries are still underway.
Pakistan’s Prime Minister Shehbaz Sharif told a televised cabinet meeting that all efforts are being made to resolve pending issues between the US and Iran. According to an AP report, the two sides could “be headed for a second round of talks” as soon as Thursday.
Blockade begins
The naval blockade started coming into effect at 10 AM ET (eastern time) on Monday (8;30 PM India time).
Al Jazeera reported that the US has more than 15 warships in the area around the Strait of Hormuz. It added that if an Iranian vessel or Iranian-linked vessel decided to resist, US Marines or Navy Seals would resort to “contested boarding” in which they would board that Iranian ship.
However, the Al Jazeera report said that shortly after the blockade was first announced, an Iranian-linked vessel that was either in the or was about to pass through it did manage to get through successfully and defy the blockade.
Legal framework
According to the US Navy Commander’s handbook on naval operations law from 2022, a blockade is defined as a “belligerent operation to prevent vessels and/or aircraft of all states, enemy and neutral, from entering or exiting specified ports, airfields, or coastal areas belonging to, occupied by, or under the control of an enemy state”.
Citing a note from the US Central Command to mariners, a BBC report on Monday said that the blockade will “encompass the entirety of the Iranian coastline to include but not limited to ports and oil terminals,” and applies to all vessel traffic, regardless of flag.
During the blockade, any vessel entering or departing the blockaded area without authorization is subject to “interception, diversion, and capture”. It would permit passage of humanitarian shipments, including food, medical supplies and other essential goods, subject to inspection.
India impact
The volatility in has direct implications for India, which imports about 90% of its oil requirement.
As of 10 April, the Indian crude oil basket stood at $116.26 per barrel. The basket represents a derived mix of Sweet grade (Brent Dated) and Sour grade (Oman & Dubai average) crude imported by Indian refineries each month.
On Monday, crude oil tanker MT Jaya, carrying 277,321 metric tonnes of Iranian oil, reached Paradip Port in Odisha from Kharg Island, Iran, according to a tweet by Paradip Port Authority.