Oil prices fall as investors await 'toughest' U.S. sanctions on Iran

• U.S. benchmark WTI crude fell 1.3% to $85.93 per barrel, while Brent crude lost 1.24% to $93.22 a barrel
• Commonwealth Bank of Australia expects Brent crude to trade between $70 and $100 per barrel in the second half of 2026, with volatility depending on whether U.S. isolation efforts succeed
• Iran's Revolutionary Guard Corps dismissed the threats, claiming Tehran can 'easily establish economic relations with countries' and counter the sanctions effects

SUMMARY

Oil prices declined Monday as markets awaited the unveiling of what the U.S. has characterized as its most severe sanctions package against Iran. WTI crude futures fell 1.3% to $85.93 per barrel, while Brent crude dropped 1.24% to $93.22 per barrel.

U.S. Treasury Secretary Scott Bessent is scheduled to announce the new sanctions, describing the initiative as an "economic D-Day" and the "single greatest financial offensive ever marshaled against an adversary." The Trump administration aims to "collapse" Iran's economy through unprecedented measures and is pressuring allies and other nations to sever economic ties with Tehran. President Trump has threatened "crushing economic operation" against Iran and warned of steep penalties for countries helping Iran evade sanctions.

Iran has rejected these threats, with the Islamic Revolutionary Guard Corps stating it has methods to counter such measures and can maintain economic relationships with other countries.

Commonwealth Bank of Australia projects continued volatility in oil markets during the second half of the year, noting uncertainty around the effectiveness of U.S. isolation efforts and the risk of Iranian retaliation through increased violence. CBA forecasts Brent crude trading between $70 and $100 per barrel in H2 2026, with prices potentially falling toward the lower end if Strait of Hormuz oil flows recover to just 50-60% of pre-war levels, which would be sufficient to create expectations of global oversupply.

The sanctions announcement represents a significant escalation in U.S.-Iran tensions with direct implications for global energy markets and supply chains.