WEB DESK: Oil prices fell by more than $1 per barrel on Monday as investors booked profits ahead of an anticipated US announcement on fresh sanctions against Iran, a move that could further disrupt energy supplies from the Middle East.
Brent crude futures dropped $1.23, or 1.3%, to $93.16 a barrel by 0329 GMT. US West Texas Intermediate (WTI) crude also declined $1.36, or 1.6%, to $85.70 per barrel.
Despite Monday’s losses, both benchmarks recorded their second consecutive weekly gains last week, rising more than 5%. The increase came as US-Iran peace negotiations reached an impasse, limiting oil flows through the Strait of Hormuz, a key waterway that previously handled around one-fifth of global oil supplies.
US Treasury Secretary Scott Bessent is scheduled to hold a press conference at 2pm EDT (1800 GMT) on Monday and has warned that Washington could impose what he described as the “toughest sanctions in history” on Iran. President Donald Trump has also threatened sanctions against countries continuing trade with Tehran.
Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia, said it remained uncertain whether Washington’s efforts to economically isolate Iran would achieve their intended results.
He cautioned, however, that if the measures proved effective, the possibility of a stronger Iranian response and increased regional violence could become a greater concern for global energy markets.
Iran has strongly criticised the expected US sanctions, although President Masoud Pezeshkian has called for resolving the crisis through diplomacy.
IG Markets analyst Tony Sycamore said divisions within Iran’s leadership could determine how the situation develops, with more pragmatic elements favouring de-escalation while hardliners may seek continued confrontation.
He said developments by the end of the week could provide a clearer indication of which group holds greater influence in Tehran.
Meanwhile, trade sources said offers of Iranian crude to Chinese buyers had declined while prices had risen after the US blockade restricted Tehran’s oil exports.
Iran, however, allowed several Iraqi oil tankers to transit through the Strait of Hormuz following repeated requests from Baghdad, Iran’s state-run IRNA news agency reported on Saturday.
Analysts also warned that the restoration of Middle Eastern oil supplies could take longer than initially anticipated as the US-Iran conflict continues.
Morgan Stanley analysts said global crude supplies were tightening, pointing to one of the sharpest recent declines in oil held at sea, along with falling onshore inventories, including in China.
They said the tightening supply was largely being driven by reduced exports from the Middle East, with several data indicators showing aggregate regional exports had fallen back to levels last seen in March and April. The analysts consequently slowed their expectations for a recovery in Middle Eastern oil supplies.
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