Oil Slips Ahead of U.S.-Iran Talks
Brent crude edged lower on Tuesday as traders weighed the risk of supply disruptions following Iran’s naval drills near the Strait of Hormuz, conducted just hours before fresh nuclear negotiations with the United States.
Brent futures dipped 0.3%, or 22 cents, to $68.43 a barrel, after rising 1.33% in the previous session. Meanwhile, U.S. West Texas Intermediate stood at $63.60 per barrel, up 71 cents. The gain largely reflected delayed settlement activity due to the U.S. Presidents Day holiday.
Trading volumes were thinner, with major Asian markets including mainland China, Hong Kong, Taiwan, South Korea and Singapore closed for Lunar New Year celebrations.
Diplomacy and Military Signals Drive Volatility
Investor focus has shifted toward diplomatic developments in Geneva, where U.S. and Iranian officials are holding talks. U.S. President Donald Trump said he would participate “indirectly,” expressing optimism that Tehran seeks an agreement. Over the weekend, however, he also remarked that regime change in Iran “would be the best thing that could happen.”
Analysts note that oil prices are currently reacting more to geopolitical headlines than to standard supply-demand fundamentals.
“Market sentiment is closely tied to the tone and progress of these negotiations,” said Sugandha Sachdeva, founder of SS WealthStreet. The evolving situation, she added, is maintaining a geopolitical risk premium in oil markets.
Iran initiated new military exercises in the Strait of Hormuz on Monday. The waterway is critical to global energy flows, handling a significant share of crude exports from Gulf producers.
Strategic Chokepoint and OPEC+ Outlook
The Strait of Hormuz serves as a primary export route for Iran as well as fellow OPEC members Saudi Arabia, the United Arab Emirates, Kuwait and Iraq. Most of that crude heads to Asian buyers, heightening market sensitivity to any perceived threat to shipping lanes.
Meanwhile, market participants are also watching supply policy from the OPEC+ alliance. Sources suggest the group is inclined to resume output increases starting in April, positioning for stronger summer demand and supported by ongoing geopolitical uncertainty.
Citi analysts said that if Russian supply disruptions keep Brent trading in the $65 to $70 range in the coming months, OPEC+ could tap spare capacity to stabilize the market.
The bank’s base case anticipates that both an Iran nuclear agreement and potential progress in Russia-Ukraine negotiations could materialize by or during the summer, possibly easing geopolitical risk and pushing Brent prices toward $60 to $62 per barrel.
For now, oil markets appear set for continued volatility, with rapid price swings driven by diplomatic signals as much as by physical supply trends.
