Oil Prices Dip as Traders Assess Supply Risks Due to U.S.–Iran Tensions

• About one-fifth of global oil consumption passes through the Strait of Hormuz, making it a critical chokepoint for crude exports from Iran, Saudi Arabia, UAE, Kuwait, and Iraq to Asia
• The U.S. issued maritime warnings despite Iran's foreign ministry reporting 'good start' to Oman-mediated nuclear talks, keeping a modest risk premium in oil markets
• The EU proposed extending Russia sanctions to include ports in Georgia and Indonesia handling Russian oil, while India bought 6 million barrels from Africa and Middle East, avoiding Russian crude amid U.S. trade deal negotiations

Oil Prices Dip as Traders Assess Supply Risks Due to U.S.–Iran Tensions

Market Movement:

Oil prices declined slightly on Tuesday, with Brent crude futures down 0.4% to $68.79 per barrel and West Texas Intermediate falling 0.4% to $64.13 by 0102 GMT. This followed a more than 1% gain on Monday.

Key Catalyst:

The U.S. Department of Transportation's Maritime Administration issued guidance warning U.S.-flagged commercial vessels to maintain distance from Iranian territorial waters and decline boarding requests from Iranian forces. This advisory heightened concerns over potential supply disruptions through the Strait of Hormuz, through which approximately 20% of global oil consumption passes.

Geopolitical Context:

Despite the cautionary guidance, Oman-mediated nuclear talks between the U.S. and Iran reportedly started on a positive note last week. However, analysts note that lingering uncertainty over potential escalation, sanctions tightening, or supply disruptions has maintained a modest risk premium in oil prices. Major OPEC producers including Iran, Saudi Arabia, UAE, Kuwait, and Iraq rely on the strait for crude exports, primarily to Asian markets.

Additional Developments:

• The European Union is considering extending Russia sanctions to ports in Georgia and Indonesia handling Russian oil—marking the first time the bloc would target third-country ports
• Indian Oil Corp purchased 6 million barrels of crude from West Africa and the Middle East, avoiding Russian oil as New Delhi pursues a trade agreement with Washington

Market Implications:

The modest price dip reflects traders balancing supply disruption risks against ongoing diplomatic efforts, with the Strait of Hormuz remaining a critical focal point for global energy security.