Oil Prices Ease as Hopes for US-Iran Talks Offset Supply Concerns

Oil prices slipped on Tuesday, remaining close to one-week lows as investors reacted to signs of possible diplomatic progress between the United States and Iran, even as supply risks in the Middle East continued to support the market.

Brent crude futures fell 50 cents, or 0.57 percent, to $87.86 a barrel by 09:10 a.m. Saudi time. US West Texas Intermediate crude declined 37 cents, or 0.45 percent, to $82.24 per barrel.

The decline followed a sharp selloff in the previous trading session, when both benchmark contracts dropped about 8 percent after the United States suspended its campaign of air strikes against Iran over the weekend. The move raised hopes that tensions between the two countries could ease through negotiations rather than further military action.

US President Donald Trump said on Monday that Washington was holding “good talks” with Iran and suggested there was a possibility of reaching a resolution. At the same time, he warned that military strikes could resume if negotiations failed. Iranian officials also maintained that they would retaliate if hostilities restarted, keeping uncertainty in the market.

Tony Sycamore, an analyst at IG, said the prospect of diplomacy had reduced fears that the conflict would escalate and disrupt oil supplies.

“For now, the relief that an off-ramp has been found has taken the heat out of prices and eased concerns around Houthi attacks on Saudi infrastructure,” Sycamore said in a client note. He added that the situation remained highly uncertain.

Security concerns continued to focus on key shipping routes in the region. Afrah al-Zouba, the foreign minister-designate of Yemen’s internationally recognized Saudi-backed government, said the Iran-backed Houthi movement was attempting to mirror Iran’s influence over shipping in the Strait of Hormuz by threatening traffic through the Bab el-Mandeb Strait.

Edward Meir, an analyst at Marex, said it was uncertain whether the Houthis had the military capability to impose a complete blockade. He noted, however, that shipping activity had already declined significantly in both the Red Sea and the Strait of Hormuz. Meir also said weaker demand, particularly in Asia, was limiting further gains in crude prices despite ongoing geopolitical risks.

Additional pressure on oil prices came after the Caspian Pipeline Consortium resumed oil loadings at its Black Sea export terminal in Russia. Operations had been halted for a week following Ukrainian drone attacks, and the restart eased some concerns about supply disruptions.

Despite the recent decline in prices, analysts warned that risks to global oil supplies remain elevated. Saudi Arabia recently announced that it intercepted drones targeting petroleum facilities, including sites in Riyadh, and said the weapons had been launched by Iran-backed armed groups operating from Iraq. The Kingdom stated that it reserved the right to respond.

Yemen’s Houthi movement also claimed responsibility for targeting Saudi Arabia’s East-West Pipeline, which transports crude oil to the Red Sea port of Yanbu, describing the attack as retaliation for Saudi drone operations.

Barclays analysts reported that oil flows through the Strait of Hormuz remained below normal levels. They estimated that crude oil and refined product net exports through the strategic waterway averaged 2.9 million barrels per day during the week ending July 24, compared with 5.9 million barrels per day a week earlier.

Market participants are also awaiting official US inventory data after a preliminary Reuters survey suggested crude oil and gasoline stockpiles likely declined last week, while distillate inventories were expected to rise.