Oil prices fell on Tuesday as investors assessed a pause in US strikes on Iran, raising hopes for a diplomatic breakthrough. The easing tensions also improved expectations for stable Middle East energy supplies.
Diplomatic Progress Eases Market Concerns
Brent crude futures slipped 0.6 percent to $87.82 per barrel during early trading. Meanwhile, US West Texas Intermediate crude fell 0.8 percent to $81.95 per barrel. Earlier, both benchmark contracts touched their lowest levels in more than a week.
The decline followed comments from US President Donald Trump, who said talks with Iran were progressing positively. However, he warned military strikes could resume if negotiations failed. Iran also signalled it would retaliate if hostilities restarted.
IG analyst Tony Sycamore said hopes for a diplomatic solution had reduced pressure on oil prices. Nevertheless, he cautioned that the regional situation remained highly uncertain.
Shipping Risks Keep Markets on Edge
Yemen’s foreign minister-designate Afrah al-Zouba said Houthi fighters aimed to expand their influence over regional shipping routes. She claimed the group wanted to replicate Iran’s control around the Strait of Hormuz at Bab el-Mandeb.
Meanwhile, Marex analyst Edward Meir questioned whether the Houthis could enforce a full blockade. However, he noted shipping traffic had already fallen significantly across the Red Sea and the Strait of Hormuz. He also said weaker fuel demand, particularly in Asia, continued limiting further price gains.
Barclays analysts reported that crude and refined product exports through the Strait of Hormuz averaged 2.9 million barrels per day last week. The figure dropped sharply from 5.9 million barrels recorded during the previous week.
Elsewhere, a Reuters poll indicated US crude oil and gasoline inventories likely declined last week. However, analysts expected distillate fuel stockpiles to increase during the same period.
