Oil prices moved lower on Monday as traders took profits ahead of an expected announcement from Washington on fresh sanctions against Iran. The new measures could further disrupt crude supplies from the Middle East.
Brent crude futures fell $1.49, or 1.6%, to $92.90 per barrel by 06:49 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude dropped $1.74, or 2%, to $85.32 per barrel.
Oil Retreats After Two Weeks of Gains
Despite Monday’s decline, both major oil benchmarks recorded their second consecutive weekly gains last week.
Brent and WTI rose by more than 5% as negotiations between the United States and Iran remained deadlocked.
The ongoing dispute has continued to limit oil shipments through the Strait of Hormuz, one of the world’s most important energy routes. Before the disruption, around one-fifth of global oil supplies passed through the waterway.
The latest decline therefore appears partly driven by profit-taking following the strong two-week rally.
U.S. Prepares Tougher Sanctions Against Iran
U.S. Treasury Secretary Scott Bessent is expected to hold a press conference at 2 p.m. EDT on Monday.
Bessent has warned that Washington could introduce what he described as the toughest sanctions ever imposed on Iran.
President Donald Trump has also threatened additional measures against countries that continue trading with Tehran.
Saxo Bank analysts said oil prices weakened as investors waited for details of Washington’s strategy to increase economic pressure on Iran.
Iran Calls for Diplomacy Despite Sanctions Threat
Iran has strongly criticized Washington’s plans for additional sanctions.
At the same time, Iranian President Masoud Pezeshkian has called for a diplomatic solution to the escalating confrontation.
However, divisions within Iran’s leadership could complicate negotiations.
IG market analyst Tony Sycamore said more pragmatic Iranian officials may favor de-escalation, while hardline factions could push for continued confrontation.
Market participants are therefore watching closely to see which side gains greater influence over Tehran’s strategy.
Iranian Oil Shipments to China Decline
The supply situation remains another major factor supporting oil prices.
Offers of Iranian crude to Chinese buyers have fallen, while prices have increased as the U.S. blockade restricts Tehran’s ability to export oil, according to trade sources.
China is a major destination for Iranian crude, making any reduction in shipments important for the broader energy market.
However, Iran has reportedly allowed several Iraqi oil tankers to pass through the Strait of Hormuz following repeated requests from Baghdad.
Strait of Hormuz Traffic Remains Restricted
Shipping activity through the Strait of Hormuz remains unusually low.
Fewer than 20 commodity vessels reportedly crossed the waterway over the weekend as Iranian and U.S. restrictions continued to limit traffic.
The Strait is a critical chokepoint for global energy shipments. Any prolonged disruption could tighten crude supplies and increase volatility in oil prices.
Middle East Oil Supply Recovery Could Take Longer
Some analysts now believe the recovery in Middle Eastern oil supplies could take longer than previously expected.
Morgan Stanley analysts said global crude availability has tightened in recent weeks.
Oil stored on ships has declined sharply, while onshore inventories have also fallen in several regions, including China.
According to the bank, lower supply from the Middle East has been a major factor behind the tightening market.
Export levels from the region have reportedly returned to levels last seen around March and April, leading analysts to delay their expectations for a full recovery in supply.
Oil Market Focus Remains on Iran and Hormuz
Oil prices may remain volatile as investors monitor Washington’s next sanctions package, Iran’s response and developments around the Strait of Hormuz.
Although prices fell on Monday, restricted shipping activity and tighter Middle Eastern exports continue to provide support to the broader crude oil market.
